Annual Report • Nov 28, 2014
Annual Report
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| 1 Key Performance Indicators |
4 |
|---|---|
| 2 Highlights First Nine Months 2014 |
7 |
| 3 Governing Bodies |
9 |
| 4 Corporate Developments |
11 |
| 5 Management Report |
12 |
| 5.1. Business Review | 12 |
| 5.2. Consolidated Financial Review | 20 |
| 6 Consolidated Financial Statements |
27 |
Mobile Subscribers: Pay TV:
Fixed Broadband: Fixed Voice:
RGUs: Convergent RGUs:
IRIS Subscribers: IRIS Subscribers as % of 3P&4P:
3P&4P Subscribers: %3P&4P Subscribers:
Operating Revenues: EBITDA (EBITDA Margin - % of revenues):
Net Income: CAPEX:
EBITDA Recurrent CAPEX: Net Financial Debt
Net Financial Debt / EBITDA
| 9M14 Highlights | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|
| Operational Highlights | |||
| Total RGUs (Net Adds) | (103.3) | 232.2 | n.a. |
| Convergent RGUs (Net Adds) | 71.6 | 1,275.3 | n.a. |
| Mobile (Net Adds) | (67.1) | 292.4 | n.a. |
| Pay TV (Net Adds) | (47.4) | (48.4) | 2.0% |
| IRIS Subscribers (Net Adds) | 155.5 | 195.6 | 25.8% |
| Convergent RGUs | 71.6 | 1,487.7 | n.a. |
| Convergent Customers | 15.6 | 303.3 | n.a. |
| Convergent Customers as % of Fixed Access Customers | 1.3% | 23.8% | 22.5pp |
| ARPU / Unique Subscriber With Fixed Access (Euros) | 37.3 | 37.7 | 1.1% |
| Financial Highlights | |||
| Operating Revenues | 1,070.5 | 1,030.1 | (3.8%) |
| Telco Revenues | 1,021.4 | 986.0 | (3.5%) |
| EBITDA | 418.3 | 397.0 | (5.1%) |
| EBITDA Margin | 39.1% | 38.5% | (0.5pp) |
| Net Income | 76.5 | 62.4 | (18.4%) |
| Free Cash Flow Before Dividends & Financial Acquisitions | 81.0 | 58.0 | (28.4%) |
Significant quarterly improvement in Pay TV net losses to 4.7 thousand in 3Q13, with just 6.1 thousand negative net adds in the fixed access Pay TV base to 1.166 million, and with positive net adds of 1.4 thousand in the DTH base. Net losses of Pay TV customers in 9M14 were 48.4 thousand;
Mobile net adds of 292.4 thousand in 9M14 driven by continued strong growth of 422.5 thousand post-paid services, primarily integrated in convergent residential offers;
As at 30 September 2014, the Governing Bodies of NOS 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 | José Pedro Pereira da Costa, Vice-President, CFO Miguel Veiga Martins, Vice-President, CTO Ana Paula Marques André Almeida Manuel Ramalho Eanes |
| Members | Ângelo Paupério António Lobo Xavier António Domingues Catarina Tavira Cláudia Azevedo Fernando Martorell Isabel dos Santos Joaquim de Oliveira Lorena Fernandes Mário Leite da Silva Rodrigo Costa |
| Chairman of the Fiscal Board | Paulo Cardoso Correira da Mota Pinto |
| Members | Eugénio Ferreira Nuno Sousa Pereira |
| Alternate | Luís Filipe da Silva Ferreira |
| Officials of the General Meeting of Shareholders | |
| Chairman | Pedro Canastra de Azevedo Maia |
| Secretary | Tiago Antunes da Cunha Ferreira de Lemos |
| In Office | ERNST & YOUNG AUDIT & ASSOCIADOS, SROC, S.A., (ROC nr 178, CMVM registry nr 9011), represented by Ricardo Filipe de Frias Pinheiro (ROC nr 739) |
|---|---|
| Alternate | Paulo Jorge Luís da Silva (ROC n.º 1334) |
In September 2014 NOS announced an agreement to acquire Mainroad - a leading IT and datacentre management company operating in Portugal since 2003, with a long history of relevant partnerships and common clients with NOS. Mainroad provides application, systems and networks support, design and technological infrastructure implementation and management for its clients. ICT is a key area of the Corporate and SME segments whilst leveraging strong convergent footprint to grow, particularly in the fixed voice, data and services markets. The acquisition of Mainroad will enable NOS to secure a presence in this segment in a much shorter time to market by acquiring an operation that has a very complementary infrastructure and commercial profile. Important datacentres are cohas significant experience with key corporate accounts.
ting Revenues of 15.4 million euros which would represent a contribution to NOS consolidated accounts of 10.6 million euros, and EBITDA of 1.96 million euros. Mainroad was acquired for a cash consideration of 14 million euros representing a post synergy EV/EBITDA multiple of 5.6x.
Convergent take up continues to be the strongest driver of operational success. With the launch of the new brand on 16 May, commercial momentum accelerated significantly with record growth in the number of households taking convergent solutions and in RGU growth, leading to market share growth.
All operational and commercial efforts are now able to be channelled into a single brand, and teams are able to focus on ramping up commercial deployment and restructuring operations in the merged entity. Results measured to date from the new brand launch are well ahead of expectations with total brand awareness of almost 100% and association of NOS´ name with all core services of over 90%.
NOS has already reached 1.488 million convergent RGUs at the end of 9M14, representing an additional 1.275 million convergent RGUs in the period. With the brand launch in May, a number of additional convergent offers were launched to address a wider range of market segments using more flexible pricing points and value propositions.
including a lower end Pay TV solution (126 channels), 30 Mbps fixed internet, unlimited fixed voice and 1 mobile SIM card with unlimited voice and SMS.
for a promotional price of 79.99 euros, adding a 5GB mobile broadband offer. Further tiering the (Pay TV, fixed voice for 29.99 euros) providing a convergent option for all market segments and pockets.
Led by the convergent DTH/4G offers as a means of providing integrated TV, fixed and mobile broadband and voice, the number of DTH convergent offers posted significant growth. With this offer, NOS has clearly become a much more competitive operator in regions where previously it was only able to provide satellite TV services and has subsequently been able to win back customers, stabilizing and even posting marginal growth in the DTH customer base.
In total, the number of mobile cards incorporated in convergent bundles grew by 509.5 thousand in 9M14. The average number of cards per convergent customer declined slightly to 1.9, compared with 2 in 1H14, reflecting an increase in the weight of convergent offers with just one SIM card, due to the launch of NOS Quatro Light, Três and Dois during 2Q14 and 3Q14.
-device TV interface IRIS is a key driver of our TV and entertainment strategy and is today the default interface for all NOS offers. All quarters of 9M14 represented record growth for IRIS, with a further 61.0 thousand, 62.7 thousand and 71.9 thousand IRIS net adds to 633 thousand, bringing penetration of the 3&4P fixed subscriber base to 76.6%, up from 48% in 9M13. IRIS has become the default TV service for all new NOS services and usage has become mainstream with over 100 million interactions per day, over 60 thousand streams at peak time and 125 thousand unique accesses to the Youtube player, amongst others.
At the end of June, NOS launched its the main differentiating features of our award winning IRIS TV interface providing the best and most innovative TV experience available with automatic recording capabilities, multiscreen and multidevice viewing and the most recent launch of the Youtube player over IRIS.
The automatic recording feature enables customers to catch up on their favourite content and return to the start of any programme - content is available for 7 days, with over 10 thousand titles automatically recorded, a feature also available over IRIS Online. The online platform also enables IRIS customers to programme recordings on the set top box, return to the start of a programme, see films in the videoclub and access automatic recordings.
NOS continued to improve the IRIS interface and integrate innovative new features and apps in 9M14. A new software release was launched, IRIS 3.2, enabling HTML5 based apps and improved navigation and the IRIS online platform became an integral part of the offer for DTH customers. Some of the most recent apps launched during 2Q14 were the World Cup 2014 with a complete interactive events timeline and a new games app for old favourites such as Pacman, Tron, and Sokoban, amongst others.
Already in 3Q14, NOS also introduced the Youtube player over the IRIS platform allowing the best internet content to be played directly over the TV interface, with full screen viewing, advanced search functionalities, related video access when watching TV or even to watch one of the Youtube channels content line up during the quarter, an interactive app for the Portuguese Football League and the
ve just been distinguished by the Portuguese public as the best in the country in the ECSI Portugal 2013 National Customer Satisfaction Index. reveals each year what the favourite goods and services of the Portuguese consumer are in various business sectors. NOS ranks leader in overall customer satisfaction compared to the other pay TV
operators scoring 7.39 points on a scale from 1 to 10, 7.94 points for mobile voice services and 7.50 points in fixed voice.
The growth in convergent bundles continues to drive strong growth in the mobile customer base of 9.2% yoy to 3.536 million subscribers. In 3Q14, NOS mobile net adds accelerated to 139 thousand mobile net adds, which compares with 108.7 thousand in 2Q14 and 45 thousand in 1Q14, a total of 292.4 thousand net adds in 9M14, reflecting a net increase in the post-paid base of 422.5 thousand and a net decline in the pre-paid base of 130.1 thousand. The momentum behind convergent take up is leading to a structural shift in market shares in the mobile market and with consumers preferring postpaid all-you-can-eat contract bundles, associated typically with 24 month loyalty periods. At the end of 9M14 less than 60% of consumer mobile services were pre-paid, compared with 71% in 9M13, a reduction of 11 pp yoy. The attractiveness of including mobile services into convergent bundles derives primarily from the higher mobile usage plans available, with unlimited mobile calls and sms.
Smartphone penetration is posting significant growth, as is the case of mobile data. Smartphones are now approximately 30% of the handset base at NOS and this is supporting very significant growth in mobile data traffic, up by close to 80% year on year to 30 GB (70% over 4G).
RGUs in the business segment are showing good performance, up 6.3% yoy to 1.023 million, led by growth in Pay TV services of 13.8% to 72 thousand, of 12.5% in Fixed Broadband services to 96.6 thousand and of 6.8% in mobile services to 664.7 thousand. The underlying characteristics of the large Corporate, SME and SoHo segments are structurally different, with the latter being affected by the spill-over effect of convergent pricing trends in the residential market. The launch of the NOS brand in May made a significant contribution to the ramp-up of commercial momentum in the SME and SoHo sales channels enhancing the NOS value proposition and making relationships with customers much more streamlined.
In the large Corporate segment, a number of very important accounts were won in the financial services and public administration sectors, amongst which it is worth highlighting Caixa Geral de Depósitos (the largest bank in Portugal, 100% state owned), Montepio Geral bank and the Ministry of Health. As from 2015, the impact of these accounts will start to be felt on Revenues and Service Margin, as and when these new customers are installed, a process that tends to take between 6-9 months.
| Operating Indicators ('000) | 3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|
| Telco (1) | ||||||||
| Aggregate Indicators | ||||||||
| Homes Passed | 3,228.5 | 3,243.2 | 3,252.4 | 0.7% | 0.3% | 3,228.5 | 3,252.4 | 0.7% |
| Total RGUs | 7,253.7 | 7,295.6 | 7,445.2 | 2.6% | 2.1% | 7,253.7 | 7,445.2 | 2.6% |
| Mobile | 3,237.9 | 3,397.1 | 3,535.8 | 9.2% | 4.1% | 3,237.9 | 3,535.8 | 9.2% |
| Pre-Paid | 2,304.0 | 2,127.1 | 2,120.9 | (7.9%) | (0.3%) | 2,304.0 | 2,120.9 | (7.9%) |
| Post-Paid | 934.0 | 1,270.0 | 1,414.9 | 51.5% | 11.4% | 934.0 | 1,414.9 | 51.5% |
| ARPU / Mobile Subscriber (Euros) | 10.0 | 9.2 | 9.7 | (2.9%) | 5.1% | 9.8 | 9.4 | (4.3%) |
| Pay TV | 1,546.2 | 1,474.3 | 1,469.6 | (5.0%) | (0.3%) | 1,546.2 | 1,469.6 | (5.0%) |
| Fixed Access (2) | 1,219.8 | 1,172.3 | 1,166.1 | (4.4%) | (0.5%) | 1,219.8 | 1,166.1 | (4.4%) |
| DTH | 326.4 | 302.1 | 303.5 | (7.0%) | 0.5% | 326.4 | 303.5 | (7.0%) |
| Fixed Voice | 1,539.0 | 1,472.5 | 1,464.6 | (4.8%) | (0.5%) | 1,539.0 | 1,464.6 | (4.8%) |
| Broadband | 916.3 | 934.5 | 957.3 | 4.5% | 2.4% | 916.3 | 957.3 | 4.5% |
| Others and Data | 14.2 | 17.2 | 17.9 | 26.4% | 4.4% | 14.2 | 17.9 | 26.4% |
| 3P&4P Subscribers | 810.0 | 810.7 | 826.4 | 2.0% | 1.9% | 810.0 | 826.4 | 2.0% |
| % 3P&4P | 66.4% | 69.2% | 70.9% | 4.5pp | 1.7pp | 66.4% | 70.9% | 4.5pp |
| Convergent RGUs | 71.6 | 1,007.7 | 1,487.7 | n.a. | 47.6% | 71.6 | 1,487.7 | n.a. |
| Convergent Customers | 15.6 | 201.7 | 303.3 | n.a. | 50.4% | 15.6 | 303.3 | n.a. |
| Convergent Customers as % of Fixed Access Customers | 1.3% | 16.5% | 23.8% | 22.5pp | 7.2pp | 1.3% | 23.8% | 22.5pp |
| IRIS Subscribers | 390.3 | 561.3 | 633.2 | 62.2% | 12.8% | 390.3 | 633.2 | 62.2% |
| IRIS as % of 3P&4P Subscribers | 48.2% | 69.2% | 76.6% | 28.4pp | 7.4pp | 48.2% | 76.6% | 28.4pp |
| Net Adds | ||||||||
| Homes Passed | 15.2 | (12.3) | 9.1 | (40.2%) | (174.4%) | 42.9 | 10.5 | (75.5%) |
| Total RGUs | 12.7 | 80.3 | 149.6 | n.a. | 86.3% | (103.3) | 232.2 | n.a. |
| Mobile | 34.4 | 108.7 | 138.7 | n.a. | 27.6% | (67.1) | 292.4 | n.a. |
| Pre-Paid | 19.8 | (34.4) | (6.2) | n.a. | (81.9%) | (104.4) | (130.1) | 24.6% |
| Post-Paid | 14.6 | 143.1 | 144.9 | n.a. | 1.2% | 37.3 | 422.5 | n.a. |
| Pay TV | (22.9) | (19.0) | (4.7) | (79.5%) | (75.2%) | (47.4) | (48.4) | 2.0% |
| Fixed Access (2) | (13.7) | (17.1) | (6.1) | (55.5%) | (64.3%) | (17.8) | (37.6) | 112.1% |
| DTH | (9.2) | (1.9) | 1.4 | n.a. | n.a. | (29.7) | (10.8) | (63.8%) |
| Fixed Voice | (10.4) | (18.8) | (7.9) | (23.7%) | (57.8%) | (18.8) | (50.4) | 167.9% |
| Broadband | 11.1 | 7.5 | 22.8 | 105.8% | 205.6% | 28.6 | 35.2 | 23.2% |
| Others and Data | 0.5 | 1.9 | 0.8 | 56.9% | (61.2%) | 1.5 | 3.4 | 123.9% |
| 3P&4P Subscribers | 4.1 | 2.3 | 15.7 | 280.8% | n.a. | 18.8 | 20.5 | 9.1% |
| Convergent RGUs | 37.3 | 451.9 | 480.0 | n.a. | 6.2% | 71.6 | 1,275.3 | n.a. |
| Convergent Customers | 7.7 | 86.3 | 101.6 | n.a. | 17.7% | 15.6 | 258.0 | n.a. |
| IRIS Subscribers | 51.6 | 62.7 | 71.9 | 39.3% | 14.7% | 155.5 | 195.6 | 25.8% |
(1) Portuguese Operations (2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| Telco (1) Indicators per Segment Consumer Total RGUs 6,290.6 6,279.4 6,421.8 2.1% 2.3% 6,290.6 6,421.8 2.1% Unique Subscribers With Fixed Access (2) 1,202.4 1,127.0 1,114.6 (7.3%) (1.1%) 1,202.4 1,114.6 (7.3%) Pay TV 1,483.0 1,406.5 1,397.6 (5.8%) (0.6%) 1,483.0 1,397.6 (5.8%) Fixed Access 1,169.9 1,118.4 1,109.7 (5.1%) (0.8%) 1,169.9 1,109.7 (5.1%) DTH 313.1 288.1 288.0 (8.0%) (0.1%) 313.1 288.0 (8.0%) IRIS Subscribers 380.4 544.4 615.3 61.7% 13.0% 380.4 615.3 61.7% Broadband 844.7 858.9 878.7 4.0% 2.3% 844.7 878.7 4.0% Fixed Voice 1,347.4 1,281.1 1,274.3 (5.4%) (0.5%) 1,347.4 1,274.3 (5.4%) Mobile 2,615.5 2,733.0 2,871.1 9.8% 5.1% 2,615.5 2,871.1 9.8% % 1P 15.5% 14.0% 12.4% (3.1pp) (1.6pp) 15.5% 12.4% (3.1pp) % 2P 18.4% 18.5% 17.1% (1.2pp) (1.4pp) 18.4% 17.1% (1.2pp) % 3P&4P 66.1% 67.9% 70.5% 4.4pp 2.5pp 66.1% 70.5% 4.4pp ARPU / Unique Subscriber With Fixed Access (Euros) 36.5 37.8 38.5 5.4% 1.8% 37.3 37.7 1.1% Net Adds Total RGUs 8.2 64.7 142.3 n.a. 120.0% (127.2) 186.0 n.a. Unique Subscribers With Fixed Access (16.5) (32.1) (12.4) (24.9%) (61.3%) (27.0) (68.7) 154.3% Pay TV (22.1) (22.7) (8.9) (59.9%) (61.0%) (45.6) (57.9) 27.1% Fixed Access (13.4) (19.8) (8.7) (34.8%) (56.1%) (17.1) (44.6) 160.6% DTH (8.7) (2.9) (0.1) (98.3%) (94.9%) (28.5) (13.3) (53.2%) IRIS Subscribers 50.9 59.6 70.9 39.4% 18.9% 152.2 189.1 24.2% Broadband 11.4 5.1 19.8 74.2% 290.4% 28.8 28.8 (0.1%) Fixed Voice (9.4) (18.2) (6.7) (28.3%) (62.9%) (21.2) (49.9) 135.8% Mobile 28.3 100.5 138.1 n.a. 37.4% (89.2) 265.1 n.a. Business Total RGUs 963.0 1,016.1 1,023.5 6.3% 0.7% 963.0 1,023.5 6.3% Pay TV 63.2 67.8 72.0 13.8% 6.1% 63.2 72.0 13.8% IRIS Subscribers 9.9 16.9 17.9 81.0% 5.9% 9.9 17.9 81.0% Broadband 85.8 92.8 96.6 12.5% 4.1% 85.8 96.6 12.5% Fixed Voice 191.5 191.4 190.2 (0.7%) (0.6%) 191.5 190.2 (0.7%) Mobile 622.5 664.1 664.7 6.8% 0.1% 622.5 664.7 6.8% ARPU per RGU (Euros) 26.7 23.2 21.6 (19.1%) (7.2%) 26.6 23.4 (12.3%) Net Adds Total RGUs 4.5 15.6 7.3 62.4% (53.1%) 23.9 46.2 93.3% Pay TV (0.8) 3.7 4.2 n.a. 11.1% (1.8) 9.5 n.a. IRIS Subscribers 0.8 3.1 1.0 27.0% (67.6%) 3.2 6.5 99.9% Broadband 0.2 4.3 3.8 n.a. (12.6%) 1.3 9.8 n.a. Fixed Voice (1.0) (0.6) (1.2) 22.2% 90.7% 2.4 (0.5) n.a. Mobile 6.1 8.2 0.6 (90.7%) (93.1%) 22.1 27.3 23.7% |
Operating Indicators ('000) | 3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|---|
(2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
Pay TV subscribers posted a marked improvement in 3Q14 recording net losses of just 4.7 thousand compared with 19 thousand in 2Q14 and 24.7 thousand in 1Q14 (a total of 48.4 thousand in 9M14). Breaking out aggregate net-adds between fixed access and DTH, the latter posted positive net growth in the quarter of 1.4 thousand, despite still being negative in 9M14 with 10.8 thousand net losses. The much reinforced competitive performance in these geographies due to the launch of convergent DTH/4G offers mid-2Q14. The level of negative fixed access net adds posted a very significant improvement to 6.1 thousand from 17.1 thousand in 2Q14 and 14.4 thousand in 1Q14, reflecting the end of the impact of merger remedies as discussed in previous quarters and the build up in commercial momentum following the launch of the NOS brand and new convergent offers. In 9M14, Fixed Access Pay TV net losses were 37.6 thousand. Fixed Broadband services net-adds also grew to 35.2 thousand, an increase from 28.6 thousand in 9M13.
Fixed access residential ARPU increased 1.1% yoy to 37.7 euros as a result of the strong convergent RGU growth. This volume growth is helping to offset like for like price pressure being felt in the market due to aggressive competitor promotions in the stand alone triple play market.
Improvement in ARPU per mobile SIM card is also sufficing at the end of 9M14, with qoq growth of 5.1% in 3Q14to 9.7 euros and with a clear improvement in yoy decline to just 2.9 % compared with 6% in 2Q14 and in 1Q14. These improving trends show that the substantial growth in convergent postpaid contract customers is helping to mitigate the underlying revenue pressure felt in stand-alone mobile consumption. In 9M14 ARPU per Mobile Subscriber declined by 4.3% to 9.4 euros.
ARPU per RGU in the business segment continues to post a negative trend due to the impact of backbook repricing in the SoHo and SME segment affected by the read across from prices in the residential segment and with the increasing shift to convergent solutions.
NOS network rollout programme to reach an additional 550 thousand households, is on track, with the preparatory survey, licencing and infrastructure roll-out in progress. In 9M number of households passed by 10.5 thousand with the pace of activation of new locations set to accelerate significantly in the coming months. Commercial success in new areas covered is proving very positive and ahead of initial expectations.
| Operating Indicators ('000) | 3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|
| Cinema (1) | ||||||||
| Revenue per Ticket (Euros) | 4.7 | 4.7 | 4.7 | (1.0%) | (0.4%) | 4.7 | 4.7 | 0.4% |
| Tickets Sold | 2,413.5 | 1,676.6 | 1,924.4 | (20.3%) | 14.8% | 5,956.3 | 5,196.7 | (12.8%) |
| Screens (units) | 209 | 209 | 214 | 2.4% | 2.4% | 209 | 214 | 2.4% |
| (1) Portuguese Operations |
In 9M 12.8% to 5.197 million tickets, which compares with a decline in like-for-like, total market ticket sales of 15.5%1 , adjusted for the reopening of several screens by another operator. The ticket sales decline is explained mainly by the fact that 9M14 was less rich in terms of blockbusters than 9M The Gilded Cage both accounted for more tickets sold of the top film of 9M
The most successful films shown in 9M Lucy Rio 2 The Wolf of Wall Street Twelve Years a Slave Maleficent
NOS opened the first IMAX® DMR - Digital 3D screen in Lisbon in June 2013. This premium cinema experience continues to prove very successful, having already achieved a total of around 148 thousand spectators so far, in its first 15 months of operation.
During 3Q14, NOS has taken over the management, at the Forum Algarve shopping centre, of 5 new cinema screens, which have been equipped with digital technology, 3 of which 3D-enabled. As such, NOS Cinemas now has 214 screens in total.
Average revenue per ticket sold improved yoy by 0.4%, to 4.7 euros in 9M14.
Sales of 3D movie tickets were lower yoy in 9M14 as a proportion close to 8%, whereas they had represented close to 11% in 9M13. This proportion is lower than in the past due primarily to the lower number of movies in 3D and to customers choosing more lower-cost 2D alternatives.
Despite the yoy 12.4% decrease in gross box-office revenues in 9M14, NOS continues to maintain its leading market position, with a market share of 61.5% in terms of gross revenues in 9M14. As a result of the abovementioned lower ticket sales, total Cinema Exhibition revenues decreased by 11.8% yoy in 9M14 to 35 million euros.
Revenues in the Audiovisuals division posted a slight decline of 2.1% to 42.4 million euros in 9M14. Revenues were impacted primarily by the decline of cinema tickets sold in the Portuguese market and also by a tough comparison with 9M cinema distribution revenues were supported by the strong performance of the main 3 cinema blockbusters The Gilded
1 Source ICA Portuguese Institute for Cinema and Audiovisuals
Cage which were distributed by NOS. Of the top 10 cinema box-office hits in 9M14, NOS distributed 6 Lucy The Wolf of Wall Street Twelve Years a Slave Maleficent Noah Transformers: Age of Extinction therefore maintaining its strong leading position with a 60% market share in terms of gross revenues.
ZAP has become a reference operator in Angola and Mozambique, in Africa and in the industry, as its operations continue to be very successful. ZAP maintains its focus on continuing to expand its sales channels, increasing its presence in these territories. Therefore, it has opened seven new stores in 9M14, three in Angola (Caxito-Bengo, Soyo-Zaire, and Dundo-Lunda Norte) and four in Mozambique (Tete, Beira, Nampula and Cabo Delgado - Pemba). ZAP now has 29 own stores in Angola and 9 in Mozambique.
ZAP also continues to differentiate from its competition in these countries by improving its products and services, in order to meet the highest expectations from its customers. During 9M14, ZAP added five new channels to its packages, CMTV, a generalist channel which broadcasts a wide range of television genres from sports to international economics, politics, celebrities and fashion and Sporting TV, a channel targeted to Sporting fans that broadcasts exclusive sports content Football Academy, reports, forums, and other formats; SIC Caras, which takes a specialised look at the world of national and international celebrities, with a programming offer covering several television genres: news, reports, analysis, interviews, debates, talent shows, fiction, documentaries, magazines, auditorium programmes, talk shows, major events and special broadcasts; STV Notícias, a Mozambican news channel produced by STV, one of the free access channels in Mozambique; and Cubavision.
The following Consolidated Financial Statements have been subject to limited review. As standard practice, only the annual accounts are audited; the quarterly results are not audited separately.
| Pro-Forma Profit and Loss Statement* (Millions of Euros) |
3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|
| Operating Revenues | 361.6 | 345.0 | 347.8 | (3.8%) | 0.8% | 1,070.5 | 1,030.1 | (3.8%) |
| Telco | 342.9 | 330.2 | 332.3 | (3.1%) | 0.6% | 1,021.4 | 986.0 | (3.5%) |
| Consumer Revenues | 216.1 | 204.8 | 205.9 | (4.7%) | 0.5% | 656.0 | 618.2 | (5.8%) |
| Business Revenues | 102.4 | 98.1 | 99.1 | (3.2%) | 1.1% | 296.2 | 293.4 | (0.9%) |
| Equipment Sales | 9.4 | 8.9 | 12.3 | 31.4% | 38.3% | 24.5 | 29.4 | 20.1% |
| Others and Eliminations | 15.0 | 18.4 | 15.0 | 0.2% | (18.6%) | 44.8 | 45.1 | 0.6% |
| Audiovisuals | 14.0 | 14.2 | 14.0 | (0.1%) | (2.0%) | 43.3 | 42.4 | (2.1%) |
| Cinema (1) | 15.8 | 11.4 | 12.8 | (18.7%) | 12.1% | 39.6 | 35.0 | (11.8%) |
| Others and Eliminations | (11.0) | (10.9) | (11.3) | 2.8% | 3.7% | (33.8) | (33.3) | (1.5%) |
| Operating Costs Excluding D&A | (221.7) | (211.3) | (214.4) | (3.3%) | 1.4% | (652.3) | (633.2) | (2.9%) |
| W&S | (24.5) | (18.7) | (21.4) | (12.8%) | 14.0% | (71.5) | (61.1) | (14.5%) |
| Direct Costs | (106.4) | (100.5) | (99.7) | (6.3%) | (0.8%) | (305.9) | (296.9) | (2.9%) |
| Commercial Costs (2) | (24.0) | (21.8) | (31.7) | 32.2% | 45.6% | (66.2) | (76.2) | 15.2% |
| Other Operating Costs | (66.8) | (70.4) | (61.6) | (7.8%) | (12.4%) | (208.7) | (199.0) | (4.7%) |
| EBITDA | 139.9 | 133.6 | 133.4 | (4.6%) | (0.1%) | 418.3 | 397.0 | (5.1%) |
| EBITDA Margin | 38.7% | 38.7% | 38.4% | (0.3pp) | (0.4pp) | 39.1% | 38.5% | (0.5pp) |
| Telco | 129.4 | 124.9 | 123.8 | (4.3%) | (0.8%) | 392.0 | 369.1 | (5.8%) |
| EBITDA Margin | 37.7% | 37.8% | 37.3% | (0.5pp) | (0.6pp) | 38.4% | 37.4% | (0.9pp) |
| Cinema Exhibition and Audiovisuals | 10.5 | 8.8 | 9.6 | (8.7%) | 9.4% | 26.3 | 27.9 | 5.9% |
| EBITDA Margin | 39.0% | 37.4% | 39.5% | 0.4pp | 2.1pp | 35.0% | 39.7% | 4.7pp |
| Share of results of associates and joint ventures | 0.7 | 2.7 | 4.0 | n.a. | 48.7% | 2.3 | 11.6 | n.a. |
| EBITDA including results of associates and joint ventures | 140.6 | 136.3 | 137.5 | (2.2%) | 0.8% | 420.6 | 408.6 | (2.9%) |
| Depreciation and Amortization | (83.5) | (86.2) | (81.5) | (2.3%) | (5.4%) | (252.6) | (251.6) | (0.4%) |
| (Other Expenses) / Income | (32.8) | (12.6) | (18.3) | (44.3%) | 44.7% | (34.1) | (33.7) | (1.1%) |
| Operating Profit (EBIT) (3) | 24.3 | 37.5 | 37.6 | 54.8% | 0.4% | 134.0 | 123.2 | (8.0%) |
| (Financial Expenses) / Income | (18.3) | (14.2) | (14.9) | (18.5%) | 5.1% | (52.9) | (44.2) | (16.4%) |
| Income Before Income Taxes | 6.1 | 23.3 | 22.8 | 275.2% | (2.4%) | 81.1 | 79.0 | (2.6%) |
| Income Taxes | 12.5 | (4.8) | (4.0) | n.a. | (16.5%) | (4.0) | (16.1) | n.a. |
| Income From Continued Operations | 18.6 | 18.5 | 18.8 | 0.8% | 1.3% | 77.1 | 62.8 | (18.5%) |
| o.w. Attributable to Non-Controlling Interests | (0.2) | (0.1) | 0.0 | n.a. | n.a. | (0.6) | (0.4) | (28.5%) |
| Net Income | 18.4 | 18.4 | 18.8 | 2.0% | 1.9% | 76.5 | 62.4 | (18.4%) |
(1) Includes operations in Mozambique.
(2) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold. (3) EBIT = Income Before Financials and Income Taxes.
* The merger by incorporation of OPTIMUS into ZON that led to the creation of ZON OPTIMUS (now NOS) was completed on 27 August 2013. Resulting primarily from the merger, in 3Q13 a number of accounting policies, practices and estimates have had to be aligned. The primary changes to accounting policies, with the correspondent restatement of the prior period accounts were the capitalization of customer acquisition costs at ZON in order to align with policy also followed by other telecom operators and capitalization of certain movie rights in the audiovisuals division following IAS 38, which were restated since 1Q12 in the statutory accounts. In addition and in anticipation of the mandatory implementation of IFRS 11 as from 1Q14, whereby joint ventures may no longer be consolidated proportionately, NOS (formerly ZON OPTIMUS) has proceeded to deconsolidate the three joint ventures in which it holds stakes, ZAP (30%), Sport TV (50%) and Dreamia (50%) and has restated prior period financial statements to reflect their recognition through the equity method. To facilitate comparison between current and prior period results for the new NOS (formerly ZON OPTIMUS), the current pro-forma consolidated financial statements have been prepared, reflecting not only the statutory accounts restatement due to the changes to accounting policies, but also the consolidation of 12 months of results in 2013 (9 months in 9M13). The financial statements reflect the impact, since September 2013, in depreciation and amortization of the provisional calculation of the fair value of assets and liabilities which was used for the purposes of purchase price allocation resulting from the consolidation of OPTIMUS. The present financial review is based on these pro-forma financial statements. Appendix III to this report includes the statutory income statement for NOS (formerly ZON OPTIMUS).
Consolidated Operating Revenues were 1,030.1 million euros in 9M14, representing a decline of 3.8%. Core Telco revenues posted a marked improvement in trend in 3Q14, with a decline of 3.1% to 332.3 million euros yoy, up from 3.4% in 2Q14 and 3.9% in 1Q14, supported by the positive operating momentum throughout 9M14.
Important progress was recorded in Consumer revenues in 3Q14 with yoy decline improving sequentially to 4.7% compared with 6% in 2Q14 and 6.5% in 1Q14. In 9M14, Consumer revenues declined by 5.8%. Drilling down into underlying trends, residential fixed revenues showed improvement throughout 9M14, having reduced by just 2% yoy in 3Q14 and remaining flat in comparison with the previous quarter. Behind this very marked improvement is the take-up of convergent offers together with residential ARPU growth and the fact that the pay TV base began to record a more positive quarterly performance. Wireless residential revenues (satellite base) also posted a marked improvement in trend. Overall, consumer revenues were still negatively impacted by a decline in personal revenues, explained primarily by the structural shift from stand alone mobile services into convergent offers.
Business revenues posted a 0.9% decline yoy in 9M14. The yoy decline results from a combination of positive RGU performance which was more than offset yoy by the already discussed negative pricing environment mainly felt in the SoHo and SME market influenced by convergent pricing trends in the residential market, a trend which is starting to show quarterly improvement.
Equipment sales also recorded a significant increase of 20.1% to 29.4 million euros, led by the effect of higher handset sales which was further boosted by the very proactive handset campaigns associated with convergent bundles launched in the past quarter.
Revenues from the Audiovisuals business decreased slightly by 2.1% yoy to 42.4 million euros however revenues generated by the Cinema business fell by 11.8%, a reflection of the period for movie exhibition worldwide. NOS Cinemas outperformed the Portuguese market in terms of audience and gross box office revenues as previously explained in the operating review, maintaining a strong lead in market share of revenues of both movie exhibition and distribution.
ZAP continues to post significant growth in revenues, on the back of the very strong operational 34.6% yoy to 44.4 million euros.
Consolidated EBITDA fell by 5.1% in 9M14 to 397 million euros generating a margin of 38.5%. Telco EBITDA fell by 5.8% in 9M14 to 369.1 million euros and EBITDA from the Audiovisuals and Cinema operations posted a yoy increase of 5.9% to 27.9 million euros. The EBITDA of grew by 64.4% yoy to 17 million euros.
Consolidated Operating Costs fell by 2.9% yoy to 633.2 million euros.
Wages and Salaries fell by 14.5% to 61.1 million euros in 9M14 explained by headcount reduction since completion of the merger, primarily felt at the telecom operations.
Direct Costs recorded a 2.9% decline to 296.9 million euros, which reflects a combination of lower yoy capacity costs (-18%) and programming costs (-8%), both of which impacted by savings already achieved from merger integration projects and also the lower level of premium channels sales in comparison with 9M13.
Commercial Costs posted an increase yoy of 15.2% to 76.2 million euros. The main item driving the growth in this item was the cost of equipment sold due to the already discussed increase in handsets.
Other Operating Costs fell by 4.7% yoy to 199 million euros in 9M14, with savings achieved in maintenance and repair costs and supplies and external sevices, both of which driven mostly by integration led cost savings.
Net Income reached 62.4 million euros in 9M14, compared with 76.5 million euros in 9M13, a decrease of 18.4% yoy.
Equity in affiliate companies recorded a material yoy improvement to 11.6 million euros in 9M14, compared with 2.3 million euros in 9M13. This increase is due to the yoy growth in financial contribution of the international JV, ZAP, which amounted to 12.2 million euros in 9M14 (compared with 4.9 million euros in 9M14) and which was marginally offset by a negative contribution from other JVs of 0.6 million euros.
Depreciation and Amortization posted a small yoy decline of 0.4% to 251.6 million euros.
Other Expenses* of 33.7 million euros in 9M14 relate to non-recurrent merger related costs and still include a very material contribution from the launch of the new brand, as well as other non-cash, nonrecurrent provisions.
Net Financial Expenses fell by 16.4% to 44.2 million euros in 9M14 compared with 52.9 million euros in 9M13 as a result of the lower average level of gross debt and the lower average cost of the new debt contracted in 3Q14. Net interest charges in 3Q14 were 9.3 million euros compared with 12.4 million euros in 3Q13. Additional savings in net interest charges will materialize in coming months due to the
* terial and unusual expenses that should be disclosed separately from usual line items, to avoid distortion of the financial information from regular 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.
175 million euros floating rate note issued in 3Q14 at a significantly lower cost to replace existing facilities, as explained ahead in the section on capital structure.
Income Tax provision amounted to 16.1 million euros in 9M14 representing 20% of Income Before Income Taxes. Effective Tax rate is lower than statutory tax rate due to the impact of net contributions from equity consolidated Joint Ventures and to tax incentive programmes.
| Pro-Forma CAPEX (Millions of Euros) | 3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|
| Telco | 53.2 | 63.4 | 59.8 | 12.4% | (5.8%) | 162.4 | 168.3 | 3.6% |
| Infrastructure | 22.6 | 27.8 | 20.2 | (10.6%) | (27.4%) | 67.5 | 60.6 | (10.2%) |
| Customer Related CAPEX | 28.7 | 34.8 | 35.1 | 22.1% | 0.7% | 89.2 | 99.0 | 11.0% |
| Other | 1.9 | 0.8 | 4.5 | 138.2% | n.a. | 5.7 | 8.7 | 51.6% |
| Audiovisuals and Cinema Exhibition | 6.9 | 8.4 | 8.3 | 19.2% | (1.5%) | 21.9 | 24.3 | 10.9% |
| Recurrent CAPEX | 60.1 | 71.8 | 68.0 | 13.1% | (5.3%) | 184.3 | 192.6 | 4.5% |
| Non-Recurrent CAPEX | 1.5 | 16.8 | 18.6 | n.a. | 10.7% | 4.5 | 39.3 | n.a. |
| Total CAPEX | 61.6 | 88.6 | 86.6 | 40.6% | (2.3%) | 188.8 | 231.9 | 22.8% |
Recurrent CAPEX amounted to 192.6 million euros in 9M14, an increase of 4.5% yoy. Non recurrent CAPEX continues to grow every quarter as a result of additional network rollout and associated commercial activity which is accelerating as the new households become available for sale and also due to merger related integration projects.
Audiovisuals and Cinema CAPEX of 24.3 million euros is related mostly with the capitalization of certain movie rights in the Audiovisuals division.
As a percentage of Telecom revenues, recurrent Telecom CAPEX amounted to 17.1% in 9M14 and total recurrent CAPEX represented 18.7% of Total Revenues.
| EBITDA 139.9 133.6 133.4 (4.6%) (0.1%) 418.3 397.0 (5.1%) Recurrent CAPEX (60.1) (71.8) (68.0) 13.1% (5.3%) (184.3) (192.6) 4.5% EBITDA - Recurrent CAPEX 79.8 61.8 65.4 (18.1%) 5.8% 234.0 204.3 (12.7%) Non-Cash Items Included in EBITDA - Recurrent CAPEX(1) and (4.9) (10.1) (7.6) 54.2% (25.6%) (66.1) (53.4) (19.3%) Change in Working Capital Operating Cash Flow After Investment 74.9 51.7 57.9 (22.8%) 12.0% 167.8 151.0 (10.1%) Long Term Contracts (6.7) (4.2) (3.5) (47.3%) (15.4%) (18.2) (11.6) (36.2%) Net Interest Paid and Other Financial Charges (17.0) (15.4) (6.7) (60.6%) (56.8%) (41.2) (35.9) (12.8%) Income Taxes Paid (7.5) (0.3) 10.8 n.a. n.a. (11.1) 9.3 n.a. Other Cash Movements 1.3 0.5 0.3 (74.0%) (38.2%) 0.7 0.9 40.6% Recurrent Free Cash-Flow 45.1 32.3 58.8 30.4% 82.1% 98.0 113.7 16.0% LTE Payments 0.0 0.0 0.0 n.a. n.a. (6.0) 0.0 (100.0%) Non-Recurrent CAPEX (1.5) (16.8) (18.6) n.a. 10.6% (4.5) (35.7) n.a. Cash Restructuring Payments (6.0) (3.9) (8.1) 35.8% 109.6% (6.5) (20.0) 206.7% Free Cash Flow Before Dividends & Financial Acquisitions 37.6 11.6 32.1 (14.8%) 176.1% 81.0 58.0 (28.4%) Foreign Currency Debt Exchange Effect (0.0) 0.0 0.1 n.a. n.a. (0.0) 0.1 n.a. Acquisitions of Financial Investments 0.0 0.0 (14.0) n.a. n.a. 0.0 (14.0) n.a. New Companies' Net Debt 0.0 0.0 0.6 n.a. n.a. 0.0 0.6 n.a. Dividends 0.0 (62.0) 0.0 n.a. (100.0%) (62.0) (62.0) 0.1% Total Free Cash Flow 37.6 (50.4) 18.7 (50.1%) (137.2%) 19.0 (17.4) n.a. Debt Variation Through Accruals & Deferrals & Others (2) 1.0 4.7 (6.3) n.a. n.a. (5.5) 0.3 n.a. Change in Net Financial Debt 38.6 (45.7) 12.4 67.9% n.a. 13.5 (17.1) n.a. |
Pro-Forma Cash Flow (Millions of Euros) | 3Q13 | 2Q14 | 3Q14 | 3Q14 / 3Q13 | 3Q14 / 2Q14 | 9M13 | 9M14 | 9M14 / 9M13 |
|---|---|---|---|---|---|---|---|---|---|
(2) Accruals of interest payments were reclassified to below Total Free Cash Flow in 4Q13 and prior period cash flow statements were restated to adjust for this reclassification.
Operating Cash Flow after Investment posted a yoy decline of 10.1% in 9M14 to 151 million euros. The yoy decline is due to the previously explained decline in EBITDA of 5.1% and the increase in Recurrent CAPEX of 4.5% to 192.6 million euros. Non-cash items included in EBITDA-CAPEX and Working Capital amounted to (53.4) million euros, an improvement in comparison with the (66.1) million euros posted in 9M13.
Recurrent FCF increased by 16.0% in 9M14 to 113.7 million euros despite the lower operating cash flow, due to seasonally lower interest payments and other financial charges, lower transponder payments yoy reflected in the LTC line due to the savings achieved with the renegotiation of transponder contract terms at the end of 2012, and a positive cash tax inflow due to recovery of
Non-recurrent cash impacts on CAPEX and OPEX in 9M14 amounted to 35.7 million euros and 20 million euros, respectively, and were mainly related with cash payments within the context of additional customer driven and integration related CAPEX from the restructuring/merger process.
Free Cash Flow before Dividends and Financial Acquisitions was 58 million euros in 9M14. Adjusted for interest accruals and deferrals on debt variations, net financial debt posted an increase of 17.1 million euros in 9M14.
In 3Q14 NOS acquired Mainroad, a leading IT and datacenter management operator in Portugal for 14 million euros. The cash outflow relating to this transaction is reflected in acquisitions of financial investments.
| Pro-Forma Balance Sheet (Millions of Euros) | 2013 | 9M14 | |||||
|---|---|---|---|---|---|---|---|
| restated | |||||||
| Current Assets | 454.8 | 471.5 | |||||
| Cash and Equivalents | 74.4 | 40.9 | |||||
| Accounts Receivable, Net | 309.6 | 342.9 | |||||
| Inventories, Net | 32.6 | 34.7 | |||||
| Taxes Receivable | 11.8 | 7.5 | |||||
| Prepaid Expenses and Other Current Assets | 26.4 | 45.6 | |||||
| Non-current Assets | 2,475.0 | 2,448.7 | |||||
| Investments in Group Companies | 31.6 | 30.9 | |||||
| Intangible Assets, Net | 1,160.6 | 1,158.3 | |||||
| Fixed Assets, Net | 1,096.8 | 1,094.8 | |||||
| Deferred Taxes | 156.5 | 138.4 | |||||
| Other Non-current Assets | 29.5 | 26.4 | |||||
| Total Assets | 2,929.9 | 2,920.2 | |||||
| Current Liabilities | 762.2 | 880.2 | |||||
| Short Term Debt | 213.4 | 303.2 | |||||
| Accounts Payable | 367.6 | 376.7 | |||||
| Accrued Expenses | 129.9 | 154.3 | |||||
| Deferred Income | 25.5 | 28.1 | |||||
| Taxes Payable | 23.0 | 17.8 | |||||
| Current Provisions and Other Liabilities | 2.8 | 0.1 | |||||
| Non-current Liabilities | 1,107.4 | 991.9 | |||||
| Medium and Long Term Debt | 928.2 | 811.9 | |||||
| Non-current Provisions and Other Liabilities | 179.2 | 180.0 | |||||
| Total Liabilities | 1,869.7 | 1,872.1 | |||||
| Equity Before Non-Controlling Interests | 1,050.6 | 1,038.3 | |||||
| Share Capital | 5.2 | 5.2 | |||||
| Issue Premium | 854.2 | 854.2 | |||||
| Own Shares | (2.0) | (9.4) | |||||
| Reserves, Retained Earnings and Other | 129.8 | 125.9 | |||||
| Net Income | 63.4 | 62.4 | |||||
| Non-Controlling Interests | 9.6 | 9.9 | |||||
| Total Shareholders' Equity 1,060.2 |
|||||||
| Total Liabilities and Shareholders' Equity | 2,929.9 | 2,920.2 |
At the end of 9M14, Net Financial Debt stood at 956.8 million euros, representing an increase of 1.8% in comparison with the end of 2013 and a decrease of 1.3% with the end of 1H14.
Total financial debt at the end of 9M14 amounted to 1,000.1 million euros, which was offset with a cash and short-term investment position on the balance sheet of 43.4 million euros. At the end of 9M14, NOS also had 310 million euros of non-issued commercial paper programs. The all-in average 5.05% at the end of 9M14.
Net Financial Gearing increased to 47.7% at the end of 9M14 compared with 47.0% at the end of 2013, and Net Financial Debt / EBITDA (last 4 quarters) now stands at 1.9x.
During 9M14 NOS completed a bond issue of 175 million euros, through a private offering, with a 6 year term. These new Notes were issued together with the early redemption, of an existing bond (issued originally by Sonaecom in September 2011, and transferred to NOS following the merger) in 2010-2014 Notes issued in November 2010 in th -2020 notes will be fully redeemed at the end of the term in September 2020, the interest rate is floating with a spread of 215 bps, and the first coupon will be due in March 2015.
The financing deals completed in 9M14 will start to have a very favourable impact on the all-in average cost of debt going forward.
The average maturity of Net Financial Debt was significantly extended to 2.51 years.
The total interest rate hedging operations in place at the end of 9M14 amounted to 107 million euros. Taking into account the retail bonds issued in June 2012 and the EIB loan disbursed in June 2014, both issued at a fixed rate for a total of 200 million euros and 110 million euros respectively the proportion of NO 44%.
| Pro-Forma Net Financial Debt (Millions of Euros) | 2013 | 9M14 | 9M14 / 2013 |
|---|---|---|---|
| Short Term | 196.0 | 283.2 | 44.5% |
| Bank and Other Loans | 187.5 | 274.8 | 46.6% |
| Financial Leases | 8.6 | 8.4 | (1.5%) |
| Medium and Long Term | 821.7 | 716.9 | (12.7%) |
| Bank and Other Loans | 811.5 | 705.2 | (13.1%) |
| Financial Leases | 10.1 | 11.8 | 16.3% |
| Total Debt | 1,017.7 | 1,000.1 | (1.7%) |
| Cash, Short Term Investments and Intercompany Loans | 78.0 | 43.4 | (44.4%) |
| Net Financial Debt | 939.7 | 956.8 | 1.8% |
| Net Financial Gearing (1) | 47.0% | 47.7% | 0.7pp |
| Net Financial Debt / EBITDA | 1.8x | 1.9x | n.a. |
| (1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity). |
| (Amounts stated in thousands of euros) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| NOTES | r d QUARTER 13 3 REPORTED |
9M 13 REPORTED |
r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
rd QUARTER 14 3 |
9M 14 | |||||
| REVENUES: | |||||||||||
| Services rendered | 240,586 | 611,733 | 240,586 | 611,733 | 329,274 | 977,270 | |||||
| Sales | 8,678 | 19,925 | 8,678 | 19,925 | 15,863 | 40,448 | |||||
| Other operating revenues | 2,329 | 4,694 | 2,329 | 4,694 | 2,681 | 12,419 | |||||
| 6 | 251,594 | 636,351 | 251,594 | 636,351 | 347,818 | 1,030,137 | |||||
| COSTS, LOSSES AND GAINS: | |||||||||||
| Wages and salaries | 7 | 16,892 | 41,028 | 16,892 | 41,028 | 21,351 | 61,126 | ||||
| Direct costs | 8 | 75,188 | 183,116 | 75,188 | 183,116 | 99,693 | 296,898 | ||||
| Costs of products sold | 9 | 4,407 | 6,860 | 4,407 | 6,860 | 14,900 | 37,030 | ||||
| Marketing and advertising | 4,125 | 13,614 | 4,125 | 13,614 | 11,471 | 23,485 | |||||
| Support services | 1 0 |
15,522 | 42,138 | 15,522 | 42,138 | 21,707 | 65,824 | ||||
| Supplies and external services | 1 0 |
31,644 | 79,291 | 31,644 | 79,291 | 43,522 | 136,816 | ||||
| Other operational losses / (gains) | 338 | 422 | 338 | 422 | 130 | 882 | |||||
| Taxes | 2,400 | 4,731 | 2,400 | 4,731 | 6,030 | 16,219 | |||||
| Provisions and adjustments | 1 1 |
(198) | 7,220 | (198) | 7,220 | (4,427) | (5,100) | ||||
| Net Losses / (gains) of affiliated companies | 1 2 |
- | - | (681) | (2,335) | (4,024) | (11,633) | ||||
| Depreciation, amortisation and impairment losses | 1 3 |
59,845 | 159,445 | 59,845 | 159,445 | 81,539 | 251,642 | ||||
| Reestructuring costs | 15,926 | 16,133 | 15,926 | 16,133 | 12,445 | 25,492 | |||||
| Losses/(gains) on sale of assets, net | 156 | (667) | 156 | (667) | (1,330) | (1,304) | |||||
| Other losses/(gains), net | 16,193 | 16,275 | 16,193 | 16,275 | 7,163 | 9,551 | |||||
| 242,438 | 569,607 | 241,757 | 567,271 | 310,170 | 906,928 | ||||||
| INCOME BEFORE FINANCIAL RESULTS AND TAXES |
9,156 | 66,744 | 9,837 | 69,080 | 37,648 | 123,209 | |||||
| Financial costs | 1 4 |
8,629 | 22,263 | 8,629 | 22,263 | 9,255 | 27,843 | ||||
| Net foreign exchange losses/(gains) | 51 | 9 3 |
51 | 9 3 |
89 | 9 9 |
|||||
| Net losses/(gains) on financial assets | 1 5 |
805 | 1,330 | 805 | 1,330 | 1 1 |
940 | ||||
| Net Losses / (gains) of affiliated companies | (681) | (2,335) | - | - | - | - | |||||
| Net other financial expenses/(income) | 1 4 |
4,823 | 13,586 | 4,823 | 13,586 | 5,529 | 15,356 | ||||
| 13,627 | 34,936 | 14,308 | 37,272 | 14,884 | 44,238 | ||||||
| INCOME BEFORE TAXES | (4,471) | 31,808 | (4,471) | 31,808 | 22,764 | 78,971 | |||||
| Income taxes | 1 6 |
(3,290) | 7,335 | (3,290) | 7,335 | 4,005 | 16,126 | ||||
| NET CONSOLIDATED INCOME | (1,181) | 24,474 | (1,181) | 24,474 | 18,759 | 62,845 | |||||
| ATTRIBUTABLE TO: | |||||||||||
| Non-controlled interests | 211 | 570 | 211 | 570 | (3) | 407 | |||||
| NOS GROUP SHAREHOLDERS | (1,393) | 23,904 | (1,393) | 23,904 | 18,762 | 62,438 | |||||
| EARNINGS PER SHARES | |||||||||||
| Basic - euros | 1 7 |
(0.00) | 0.07 | (0.00) | 0.07 | 0.04 | 0.12 | ||||
| Diluted - euros | 1 7 |
(0.00) | 0.07 | (0.00) | 0.07 | 0.04 | 0.12 |
As standard practice, only the annual accounts are audited; the quarterly results and the restated 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 2014.
| (Amounts stated in thousands of euros) | |||||||
|---|---|---|---|---|---|---|---|
| NOTES | r d QUARTER 13 3 REPORTED |
9M 13 REPORTED |
r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| NET INCOME FOR THE PERIOD | (1,181) | 24,474 | (1,181) | 24,474 | 18,759 | 62,845 | |
| OTHER INCOME | |||||||
| ITENS THAT MAY BE RECLASSIFIED | |||||||
| SUBSEQUENTLY TO THE INCOME STATEMENT: | |||||||
| Accounting for equity method | 23 | - | - | 542 | 350 | (239) | (247) |
| Fair value of interest rate swap | 31 | (725) | 1,336 | (725) | 1,336 | 1,383 | 915 |
| Deferred income tax - interest rate swap | 31 | 205 | (354) | 205 | (354) | (80) | 49 |
| Fair value of exchange rate forward | 31 | (176) | (87) | (176) | (87) | 348 | 488 |
| Deferred income tax -exchange rate forward | 31 | 38 | 25 | 38 | 25 | (124) | (163) |
| Currency translation differences and others | 103 | 84 | (439) | (266) | 22 | - | |
| OTHER COMPREHENSIVE INCOME | (556) | 1,003 | (556) | 1,003 | 1,310 | 1,042 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
(1,737) | 25,477 | (1,737) | 25,477 | 20,069 | 63,887 | |
| ATTRIBUTABLE TO: | |||||||
| NOS group shareholders | (1,949) | 24,907 | (1,949) | 24,907 | 20,072 | 63,480 | |
| Non-controlling interests | 211 | 570 | 211 | 570 | (3) | 407 |
As standard practice, only the annual accounts are audited; the quarterly results and the restated 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 2014.
| 30-09-2013 | 31-12-2013 | 30-09-2013 | 31-12-2013 | 30-09-2014 | ||
|---|---|---|---|---|---|---|
| NOTES | REPORTED | RESTATED | RESTATED | |||
| UNAUDITED | REPORTED | UNAUDITED | UNAUDITED | UNAUDITED | ||
| ASSETS | ||||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | 20 | 57,586 | 74,380 | 57,586 | 74,380 | 40,862 |
| Accounts receivable - trade | 21 | 290,229 | 276,630 | 290,229 | 276,630 | 311,998 |
| Accounts receivable - other | 38,830 | 32,999 | 38,830 | 32,999 | 30,888 | |
| Inventories | 33,913 | 32,579 | 33,913 | 32,579 | 34,727 | |
| Taxes receivable | 22 | 7,576 | 11,830 | 7,576 | 11,830 | 7,477 |
| Non-current assets held-for-sale | 678 | 678 | 678 | 678 | 678 | |
| Prepaid expenses | 30,618 | 25,546 | 30,618 | 25,546 | 44,520 | |
| Other current assets | 129 | 199 | 129 | 199 | - | |
| Derivative financial instruments | 31 | - | - | - | - | 356 |
| TOTAL CURRENT ASSETS | 459,560 | 454,840 | 459,560 | 454,840 | 471,506 | |
| NON - CURRENT ASSETS | ||||||
| Accounts receivable - other | 5,400 | 5,173 | 5,400 | 5,173 | 3,699 | |
| Tax receivable Investments in jointly controlled companies and |
22 | - | 4,226 | - | 4,226 | 4,232 |
| associated companies | 23 | 32,489 | 31,614 | 32,489 | 31,614 | 30,868 |
| Available-for-sale financial assets | 24 | 19,329 | 19,329 | 19,329 | 19,329 | 18,423 |
| Intangible assets | 25 | 1,115,286 | 1,111,107 | 1,182,898 | 1,160,599 | 1,158,265 |
| Tangible assets | 26 | 1,108,653 | 1,096,823 | 1,083,147 | 1,096,823 | 1,094,066 |
| Investment property | 812 | 801 | 812 | 801 | 765 | |
| Deferred income tax assets | 1 6 |
164,219 | 165,416 | 176,250 | 156,467 | 138,416 |
| TOTAL NON - CURRENT ASSETS | 2,446,187 | 2,434,489 | 2,500,324 | 2,475,032 | 2,448,735 | |
| TOTAL ASSETS | 2,905,747 | 2,889,329 | 2,959,884 | 2,929,872 | 2,920,241 | |
| LIABILITIES | ||||||
| CURRENT LIABILITIES: | ||||||
| Borrowings | 27 | 84,988 | 213,431 | 84,988 | 213,431 | 303,217 |
| Accounts payable-trade | 28 | 245,764 | 296,823 | 245,764 | 296,823 | 314,490 |
| Accounts payable-other | 67,273 | 70,748 | 67,273 | 70,748 | 62,182 | |
| Accrued expenses | 183,882 | 129,901 | 183,882 | 129,901 | 154,295 | |
| Deferred income | 27,909 | 25,518 | 27,909 | 25,518 | 28,098 | |
| Taxes payable | 22 | 28,141 | 22,992 | 28,141 | 22,992 | 17,827 |
| Provisions for other liabilities and charges | 29 | 2,850 | - | 2,850 | - | - |
| Derivative financial instruments | 31 | 132 | 2,814 | 132 | 2,814 | 127 |
| TOTAL CURRENT LIABILITIES | 640,939 | 762,227 | 640,939 | 762,227 | 880,236 | |
| NON - CURRENT LIABILITIES | ||||||
| Borrowings | 27 | 1,064,350 | 928,239 | 1,064,350 | 928,239 | 811,867 |
| Accounts payable-other | - | - | - | - | 44 | |
| Accrued expenses | 16,887 | 28,705 | 14,960 | 28,705 | 27,439 | |
| Deferred income | 2,206 | 2,060 | 2,206 | 2,060 | 6,159 | |
| Provisions for other liabilities and charges | 29 | 94,820 | 92,429 | 138,820 | 132,972 | 128,152 |
| Deferred income tax liabilities | 1 6 |
8,623 | 15,456 | 19,620 | 15,456 | 16,560 |
| Derivative financial instruments | 31 | 4,715 | - | 4,715 | - | 1,640 |
| TOTAL NON - CURRENT LIABILITIES | 1,191,602 | 1,066,889 | 1,244,672 | 1,107,432 | 991,861 | |
| TOTAL LIABILITIES | 1,832,541 | 1,829,116 | 1,885,611 | 1,869,659 | 1,872,097 | |
| SHAREHOLDER'S EQUITY | ||||||
| Share capital | 30.1 | 5,152 | 5,152 | 5,152 | 5,152 | 5,152 |
| Capital issued premium | 30.2 | 854,219 | 854,219 | 854,219 | 854,219 | 854,219 |
| Own shares | 30.3 | (896) | (2,003) | (896) | (2,003) | (9,416) |
| Legal reserve | 30.4 | 3,556 | 3,556 | 3,556 | 3,556 | 3,556 |
| Other reserves and accumulated earnings | 30.4 | 177,536 | 178,864 | 178,603 | 178,864 | 122,339 |
| Net income | 23,904 | 10,810 | 23,904 | 10,810 | 62,438 | |
| EQUITY BEFORE NON - CONTROLLING | 1,063,470 | 1,050,598 | 1,064,538 | 1,050,598 | 1,038,288 | |
| INTERESTS | ||||||
| Non-controlling interests | 9,736 | 9,615 | 9,736 | 9,615 | 9,856 | |
| TOTAL EQUITY | 1,073,207 | 1,060,213 | 1,074,274 | 1,060,213 | 1,048,144 | |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,905,747 | 2,889,329 | 2,959,884 | 2,929,872 | 2,920,241 |
The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as at 30 September 2014.
for the Nine Months ended on 30 September 2013 Restated and 30 September 2014
| NOTES | SHARE CAPITAL | CAPITAL ISSUED PREMIUM |
DISCOUNTS AND OWN SHARES, PREMIUMS |
OWN SHARES | LEGAL RESERVE | AND ACCUMULATED OTHER RESERVES EARNINGS |
NET INCOME | NON - CONTROLLED INTERESTS |
TOTAL | |
|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE AS AT 1 JANUARY 2013 (REPORTED) | 3,091 | - | (910) | (4) | 3,556 | 168,086 | 36,018 | 9,396 | 219,234 | |
| Effect of change in accounting policies | 2 | - | - | - | - | - | (3,301) | 3,476 | - | 175 |
| BALANCE AS AT 1 JANUARY 2013 (RESTATED) | 3,091 | - | (910) | (4) | 3,556 | 164,785 | 39,494 | 9,396 | 219,409 | |
| Result appropriation | ||||||||||
| Transfered to reserves | - | - | - | - | - | 39,494 | (39,494) | - | - | |
| Dividends paid | 1 8 |
- | - | - | - | - | (37,044) | - | (229) | (37,273) |
| Capital increase by incorporation of Optimus SGPS in ZON | 30.2 | 2,061 | 854,344 | - | - | - | - | - | - | 856,404 |
| Costs related to the capital increase | 30.2 | - | (125) | - | - | - | - | - | - | (125) |
| Aquisition of own shares | 30.3 | - | - | (1,486) | (4) | - | - | - | - | (1,490) |
| Distribuition of own shares | 30.3 | - | - | 1,502 | 6 | - | (1,508) | - | - | - |
| Share Plan - Changes in the consolidation perimeter | 5 | - | - | - | - | - | 9,613 | - | - | 9,613 |
| Share Plan | 35 | - | - | - | - | - | 1,223 | - | - | 1,223 |
| Comprehensive income for the period | - | - | - | - | - | 1,003 | 23,904 | 570 | 25,477 | |
| Others | - | - | - | - | - | 1,037 | - | - | 1,037 | |
| BALANCE AS AT 30 SEPTEMBER 2013 (RESTATED) | 5,152 | 854,219 | (895) | (2) | 3,556 | 178,603 | 23,904 | 9,736 1,074,274 | ||
| BALANCE AS AT 1 JANUARY 2014 | 5,152 | 854,219 | (1,999) | (4) | 3,556 | 174,639 | 15,035 | 9,615 1,060,213 | ||
| Result appropriation | ||||||||||
| Transfered to reserves | - | - | - | - | - | 15,035 | (15,035) | - | - | |
| Dividends paid | 1 8 |
- | - | - | - | - | (61,818) | - | (194) | (62,012) |
| Aquisition of own shares | 30.3 | - | - | (25,970) | (51) | - | - | - | - | (26,021) |
| Loan of own shares | 30.3 | - | - | (4,859) | (10) | - | 4,869 | - | - | - |
| Reimbursement and payment of the loan of own shares | 30.3 | - | - | 2,942 | 6 | - | (4,838) | - | - | (1,890) |
| Distribuition of own shares - share plan | 30.3 | - | - | 10,933 | 21 | - | (10,954) | - | - | - |
| Distribuition of own shares - other remunerations | 30.3 | - | - | 9,557 | 1 8 |
- | (223) | - | - | 9,352 |
| Share Plan | 35 | - | - | - | - | - | 5,139 | - | 28 | 5,167 |
| Comprehensive income for the period | - | - | - | - | - | 1,042 | 62,438 | 407 | 63,887 | |
| Others | - | - | - | - | - | (552) | - | - | (552) | |
| BALANCE AS AT 30 SEPTEMBER 2014 | 5,152 | 854,219 | (9,396) | (20) | 3,556 | 122,339 | 62,438 | 9,856 1,048,144 |
As standard practice, only the annual accounts are audited; the quarterly results and the restated 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 2014.
| 9M 13 | 9M 13 | 9M 14 | ||
|---|---|---|---|---|
| NOTES | REPORTED | RESTATED | ||
| UNAUDITED | UNAUDITED | UNAUDITED | ||
| OPERATING ACTIVITIES | ||||
| Collections from clients | 766,709 | 766,709 | 1,205,594 | |
| Payments to suppliers | (453,795) | (453,795) | (671,007) | |
| Payments to employees | (47,889) | (47,889) | (75,797) | |
| Payments / receipts relating to income taxes | (8,560) | (8,560) | 8,934 | |
| Other cash receipts / payments related with operating activities | (46,569) | (46,569) | (62,926) | |
| CASH FLOW FROM OPERATING ACTIVITIES (1) | 209,896 | 209,896 | 404,798 | |
| INVESTING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Financial investments | 35 | 35 | 100 | |
| Tangible fixed assets | 2,222 | 2,222 | 524 | |
| Intangible assets | - | - | 2 | |
| Loans granted | 27,316 | 27,316 | 1,678 | |
| Interest and related income | 24,343 | 24,343 | 5,688 | |
| Others | 2,903 | 2,903 | 1 | |
| 56,821 | 56,821 | 7,993 | ||
| PAYMENTS RESULTING FROM | ||||
| Financial investments | 4 | - | - | (14,000) |
| Tangible fixed assets | (68,001) | (68,001) | (167,684) | |
| Intangible assets | (21,240) | (21,240) | (101,413) | |
| Loans granted | (21) | (21) | - | |
| (89,262) | (89,262) | (283,097) | ||
| CASH FLOW FROM INVESTING ACTIVITIES (2) | (32,442) | (32,442) | (275,104) | |
| FINANCING ACTIVITIES | ||||
| CASH RECEIPTS RESULTING FROM | ||||
| Loans obtained | 1,157,525 | 1,157,525 | 1,951,934 | |
| Subsidies | 47 | 47 | - | |
| 1,157,572 | 1,157,572 | 1,951,934 | ||
| PAYMENTS RESULTING FROM | ||||
| Loans obtained | (1,481,050) | (1,481,050) | (1,962,600) | |
| Lease rentals (principal) | (16,824) | (16,824) | (18,754) | |
| Interest and related expenses | (31,258) | (31,258) | (41,659) | |
| Dividends | 1 8 |
(37,273) | (37,273) | (62,013) |
| Acquisition of own shares | 30.3 | (1,490) | (1,490) | (30,890) |
| Other financial activities | (692) | (692) | - | |
| (1,568,587) | (1,568,587) | (2,115,916) | ||
| CASH FLOW FROM FINANCING ACTIVITIES (3) | (411,015) | (411,015) | (163,982) | |
| Change in cash and cash equivalents (4)=(1)+(2)+(3) | (233,561) | (233,561) | (34,288) | |
| Effect of exchange differences | (19) | (19) | 26 | |
| Changes in the consolidated perimeter | 4 | 17,987 | 17,987 | 646 |
| Cash and cash equivalents at the beginning of the year | 273,179 | 273,179 | 70,142 | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 57,586 | 57,586 | 36,526 | |
| Cash and cash equivalents | 20 | 57,586 | 57,586 | 40,862 |
| Bank overdrafts | 27 | - | - | (4,336) |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 57,586 | 57,586 | 36,526 |
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 2014.
NOS, SGPS, S.A. ("NOS" or "Company"), for and until 27 august 2013 named ZON Multimédia Serviços de Telecomunicações e Multimédia, SGPS, 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..
S.A.
name to NOS, SGPS, S.A., which was registered on 27 June 2014.
Similarly, several Group companies changed their designation. ZON Conteúdos Atividade de Televisão e de Produção de Conteúdos, S.A., ZON Lusomundo Audiovisuais, S.A., ZON Lusomundo TV, S.A., ZON Lusomundo Cinemas, S.A., ZON TV Cabo Açoreana, S.A. and ZON TV Cabo Madeirense,
company dedicated to datacenter management and consulting services in IT.
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, and the production of channels for Pay TV.
September 2014 is shown in Note 30.
Cable and satellite television in Portugal is mainly provided by NOS Comunicações, S.A, name adopted after the merger in 16 May 2014 between ZON TV Cabo Portugal, S.A. in Optimus Comunicações, S.A., and its subsidiaries, NOS Açores and NOS Madeira. These companies carry out: a) cable and satellite television distribution; b) the operation of the latest generation mobile communication network, GSM/UMTS/LTE; c) the operation of electronic communications services, including data and multimedia communication services in general; d) IP voice services ("VOIP" - Voice over IP); e) Mobile 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.
On 27 August 2013, the Company completed a merger operation by incorporation of Optimus SGPS into ZON. Optimus SGPS was a parent company of a group of companies which includes Optimus - Comunicações S.A. which operates the latest generation mobile communication network, GSM/UMTS/LTE, with extensive coverage in the national territory , as well as latest next generation wireline network, which includes a transmission component, a backbone component and local access fiber components. As a result of the merger, all Optimus SGPS subsidiaries were included in the consolidation scope: Be Artis communications networks and their equipment and infrastructure, management of technologic assets and rendering of related services; Be Towering d other sites for the installation of telecommunications equipment; Optimus - Communications , SA ("Optimus") , which operates in the implementation, operation, exploitation and offer of networks and rendering services of electronic communications and related resources; offer and commercialization of products and equipments of electronic communications; Per-mar Sociedade de Construções, S.A. establishments, and Sontária undertaking of urbanization and building construction, planning, urban management, studies, construction and property management, purchase and sale of properties and resale of properties purchased for that purpose.
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 2014 were approved by the Board of Directors and their issue authorised on 5 November 2014.
The Board of Directors believes that the financial statements give a true and fair view of the ws.
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 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 2.20.
The consolidated financial statements of NOS were prepared in accordance with the International January 2014.
These consolidated finantial statements are presented in accordance with IAS 34 Interim Financial by the IFRS and so they should be analysed together with the consolidated financial statements of the year ended at 31 December 2013.
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 applicable 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 judgements 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.
The standards and interpretations that became effective as of 1 January 2014 are as follows:
standard resulted in changing the accounting of jointly controlled entities, previously proportionately consolidated, being recorded according to the equity method. Jointly controlled entities are disclosed in the attached maps.
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:
designated). The initial phase of IFRS 9 forecasts two types of measurement: amortised cost and fair value. All equity instruments are measured at fair value. A financial instrument is measured at
amortised cost only if the company has it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise, financial instruments are measured at fair value through profit and loss.
IAS 16 and 38 has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.
on or after 1 January 2016). IAS 41 required all biological assets related to agricultural activity to be measured at fair value less costs to sell. This amendment decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16, because their operation is similar to that of manufacturing. This standard is not applicable to the Group.
The Group is calculating the impact of this alteration and will apply this standard as soon as it becomes effective.
During the third quarter of the year ended at 31 December 2013, the Group, in addition to the early adoption of IFRS 10, IFRS 11, IFRS 12, and the amendments of IAS 27 and IAS 28, in line with in the sector and, particularly, considering the necessary standardization of policies with Optimus SGPS subsidiaries, changed its accounting criteria f these were recorded as an expense in the year they occurred.
From 1 January clauses in the event of early termination, are capitalised as "Intangible assets" and amortised over the period of their contracts, since it is possible to apply a reliable cost allocation to the respective contracts, as well as the revenue generated by each contract, thus fulfilling the criteria for capitalisation required by IAS 38 - Intangible Assets . When a contract is terminated, the net value of intangible assets associated with that contract is immediately recognised as an expense in the consolidated statement of comprehensive income. This accounting policy allows a more true, fair and reliable presentation of the financial position and the financial performance of the Group, as it allows . Additionally, at the date of each statement of financial position and whenever an event or change of circumstances indicates that the recorded amount of an asset may not be recoverable, impairment tests are carried out to ensure that the current value of the estimated revenues associated with each contract is greater than the amount that is capitalised.
Also, during the third quarter of the year ended at 31 December 2013, the Group changed the accounting policy regarding the future rights of use of movies and series. To date, these were
recorded as an expense in the year they occurred. The costs are capitalised as "Intangible assets" once it is possible to measure, reliably, the costs incurred with each contract as well as the revenue generated, meeting the criteria for capitalisation as required by IAS 38 - Intangible assets. Additionally, the model of amortisation and impairment of those rights has been adjusted, reflecting the business and how the rights are used more reliably. Additionally, at the date of each statement of financial position and whenever an event or change of circumstances indicates that the recorded amount of an asset may not be recoverable, impairment tests are carried out to ensure that the current value of the estimated revenues associated with each right is greater than the amount that is capitalised.
As provided under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors , these policy changes were applied retrospectively. Therefore changes were made to the consolidated statement of financial position of 1 January.
The effects of these changes in the consolidated statement of financial position are presented in the table below.
| 1 JANUARY 2013 | ||||||
|---|---|---|---|---|---|---|
| REPORTED | JOINT ARRANGEMENTS |
SUBSCRIBER ACQUISITION COSTS |
RIGHTS ON MOVIES AND SERIES |
RESTATED | ||
| ASSETS | ||||||
| Cash and cash equivalents | 308,251 | (35,072) | - | - | 273,179 | |
| Inventories | 44,317 | (10,154) | - | (2,582) | 31,581 | |
| Accounts receivable and other assets | 258,815 | (7,807) | - | (34,315) | 216,693 | |
| Investments in participated companies | 222 | 34,857 | - | - | 35,079 | |
| Intangible assets | 319,155 | (32,564) | 16,249 | 20,781 | 323,621 | |
| Tangible assets | 632,047 | (13,809) | - | - | 618,238 | |
| Deferred income tax assets | 48,146 | (706) | - | 4,753 | 52,193 | |
| TOTAL ASSETS | 1,610,953 | (65,256) | 16,249 | (11,363) | 1,550,584 | |
| LIABILITIES | ||||||
| Borrowings | 1,084,473 | (77,151) | - | - | 1,007,322 | |
| Accounts payable and other liabilities | 295,639 | (9,645) | - | - | 285,994 | |
| Provisions | 8,831 | 21,540 | - | - | 30,371 | |
| Deferred income tax liabilities | 2,776 | - | 4,712 | - | 7,488 | |
| TOTAL LIABILITIES | 1,391,719 | (65,256) | 4,712 | - | 1,331,175 | |
| SHAREHOLDER'S EQUITY | ||||||
| Equity before non-controlled interests | 209,838 | - | 11,537 | (11,363) | 210,013 | |
| Non-controlled interests | 9,396 | - | - | - | 9,396 | |
| TOTAL EQUITY | 219,234 | - | 11,537 | (11,363) | 219,409 | |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 1,610,953 | (65,256) | 16,249 | (11,363) | 1,550,584 |
During 2014, the Grou reflecting the operational nature of investments accounted for using the equity method. The prior
As provided under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors , these policy changes were applied retrospectively. Therefore changes were made to the consolidated statements of comprehensive income for the nine months ended 30 September 2013.
The effects of early adoption of new standards and amendments, and changes in accounting policies in the consolidated statements of comprehensive income are presented in the table below.
| 30 SEPTEMBER 2013 | |||
|---|---|---|---|
| REPORTED | NET LOSSES / (GAINS) OF AFFILIATED COMPANIES |
RESTATED | |
| REVENUES: | |||
| Sales and services rendered | 631,658 | - | 631,658 |
| Other operating revenues | 4,694 | - | 4,694 |
| 636,351 | - | 636,351 | |
| COSTS, LOSSES AND GAINS: | |||
| Wages and salaries | 41,028 | - | 41,028 |
| Direct costs | 183,116 | - | 183,116 |
| Supplies and external services | 79,291 | - | 79,291 |
| Provisions and adjustments | 7,220 | - | 7,220 |
| Depreciation, amortisation and impairment losses | 159,445 | - | 159,445 |
| Net Losses / (gains) of affiliated companies | - | (2,335) | (2,335) |
| Other loss / (gains), net | 99,507 | - | 99,506 |
| 569,607 | (2,335) | 567,271 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES |
66,744 | 2,335 | 69,080 |
| Net Losses / (gains) of affiliated companies | (2,335) | 2,335 | - |
| Net other financial expenses / (income) | 37,272 | - | 37,272 |
| INCOME BEFORE TAXES | 31,808 | - | 31,808 |
| Income taxes | 7,335 | - | 7,335 |
| NET CONSOLIDATED INCOME | 24,474 | - | 24,474 |
| ATTRIBUTABLE TO: | |||
| Non-controlled interests | 570 | - | 570 |
| NOS GROUP SHAREHOLDERS | 23,904 | - | 23,904 |
These changes did not have any impact in the consolidated statements of financial position, consolidated statement of cash flows and comprehensive income.
As mentioned in the 2013 financial statements, following the preliminary fair value allocation of the acquired assets and assumed liabilities related to the merger between ZON and Optimus SGPS, the price allocation of this business combination was subject to alterations during one year since the acquisition date, as established by IFRS 3 Business Combinations.
During the one year period, ended on 26 August 2014, the Company changed the fair value allocation of the acquired assets and assumed liabilities. This change was applied retrospectively, as allowed by IFRS 3 - Business Combinations.
The effects resulting of changes in the fair value of the acquired assets and the liabilities assumed in the consolidated statement of financial position are presented in the tables below.
| 30 SEPTEMBER 2013 | |||||
|---|---|---|---|---|---|
| REPORTED | CHANGES IN THE FAIR VALUE |
RESTATED | |||
| ASSETS | |||||
| Cash and cash equivalents | 57,586 | - | 57,586 | ||
| Inventories | 33,913 | - | 33,913 | ||
| Accounts receivable and other assets | 393,601 | - | 393,601 | ||
| Investments in participated companies | 32,489 | - | 32,489 | ||
| Intangible assets | 1,115,286 | 67,612 | 1,182,898 | ||
| Tangible assets | 1,108,653 | (25,506) | 1,083,147 | ||
| Deferred income tax assets | 164,219 | 12,031 | 176,250 | ||
| TOTAL ASSETS | 2,905,747 | 54,137 | 2,959,884 | ||
| LIABILITIES | |||||
| Borrowings | 1,149,338 | - | 1,149,338 | ||
| Accounts payable and other liabilities | 576,910 | (1,927) | 574,983 | ||
| Provisions | 97,670 | 44,000 | 141,670 | ||
| Deferred income tax liabilities | 8,623 | 10,997 | 19,620 | ||
| TOTAL LIABILITIES | 1,832,541 | 53,070 | 1,885,611 | ||
| SHAREHOLDER'S EQUITY | |||||
| Equity before non-controlled interests | 1,063,470 | 1,067 | 1,064,538 | ||
| Non-controlled interests | 9,736 | - | 9,736 | ||
| TOTAL EQUITY | 1,073,207 | 1,067 | 1,074,274 | ||
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,905,747 | 54,137 | 2,959,884 |
| 31 DECEMBER 2013 | |||
|---|---|---|---|
| REPORTED | CHANGES IN THE FAIR VALUE |
RESTATED | |
| ASSETS | |||
| Intangible assets | 1,111,107 | 49,492 | 1,160,599 |
| Deferred income tax assets | 165,416 | (8,949) | 156,467 |
| Other assets | 1,612,806 | - | 1,612,806 |
| TOTAL ASSETS | 2,889,329 | 40,543 | 2,929,872 |
| LIABILITIES | |||
| Provisions | 92,429 | 40,543 | 132,972 |
| Other liabilities | 1,736,687 | - | 1,736,687 |
| TOTAL LIABILITIES | 1,829,116 | 40,543 | 1,869,659 |
| TOTAL EQUITY | 1,060,213 | - | 1,060,213 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,889,329 | 40,543 | 2,929,872 |
These changes did not have any impact in the consolidated statements of comprehensive income,
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 is presented separately in the consolidated statement of financial position and in the consolidated statement of comprehensive income, respectively, -
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 nonidentifiable acquired assets and liabilities is stated in Goodwill. 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.
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 statement of comprehensive income. 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.
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 statement of comprehensive income 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.
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 p 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.
Conversion to Euros of Financial Statements Expressed in Foreign Currencies
See accounting policy 2.20.
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 are 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 2.14 and 29).
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, non-current assets are valued at the lesser of their book value or their fair value less the sale costs. From the time that certain tangible assets become deemed as non-current assets held for sale. Gains and losses on disposals of tangible assets, corresponding to the difference
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:
| 2013 | 2014 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Buildings and other constructions | 2 - 50 | 2 - 50 |
| Technical equipment: | ||
| Network installations and equipment | 7 - 40 | 7 - 40 |
| Terminal equipment | 3 - 8 | 3 - 8 |
| Other telecommunication equipment | 3 - 10 | 3 - 10 |
| Other technical equipment | 1 - 16 | 1 - 16 |
| Transportation equipment | 3 - 4 | 3 - 4 |
| Administrative equipment | 3 - 10 | 3 - 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 asse (Note 23) 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 position which may result in a possible loss of value. Any impairment loss is recorded immediately in subsequent reversal.
For the purposes of impairment tests, goodwill is attributed to the cash-generating units to which it is related (Note 25), which may correspond to the business segments in which the Group operates, or a lower level.
Internally generated intangible assets, including expenditure on research, are expensed when they are incurred. Research and 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:
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:
| 2013 | 2014 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Rights of using capacities | Period of the contract | Period of the contract |
| Telecom Licenses | 30 | 30 |
| Software Licenses | 1 - 8 | 1 - 8 |
| Customer portfolios | 5 - 6 | 5 - 6 |
| Costs incurred in raising customers loyalty contracts | Loyalty contract period | Loyalty contract period |
| Content utilisation rights | Period of the contract | Period of the contract |
| Other intangible assets | 1 - 8 | 1 - 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 cash-generating unit to -generating unit, except for the assets allocated to the cinema exhibition business which are grouped into regional cash-generating units. The recoverable amount is calculated as the higher of the net sale price and the current use value. The net sale price is the amount that would be obtained from the sale of the asset in a transaction between independent and knowledgeable entities, less the costs directly attributable to the sale. The current use value is the current value of the estimated future cash flows resulting from continued use of the asset or of the cash-generating unit. 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 a 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
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
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 statement of comprehensive income for the year. Dividends on equity instruments classified as available for sale are recognised in results for the year
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 statement of when the impairment indicators reduce or cease to exist.
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 c
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 recorded at the amount received, net of the costs incurred in their issue.
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 2.11.
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:
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 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:
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 cashflow 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 and DVDs, 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 statement of comprehensive income for the year.
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 recorde
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.
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 decommissioning 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 (Note 29).
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 statement of comprehensive income 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.
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, the benefits granted to be paid on the basis of own shares (equity instruments), are recognised at fair value at the date of allocation.
Since it is not possible to estimate reliably 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 fair value determined at the date of allocation of the benefit is recognised as a linear cost over the period in which it is acquired by the beneficiaries as a result of their services, with the corresponding increase in equity.
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.
i) Revenues of Telecommunications Services:
Cable Television, fixed broadband and fixed voice: The revenues from services provided using the fibre optic cable network result from: (a) basic channel subscription packages that can be sold in a bundle with fixed broadband/fixed voice services; (b) premium channel subscription packages and S-VOD; (c) terminal equipment rental; (d) consumption of content (VOD); (e) traffic and voice termination; (f) service activation; (g) sale of equipment; and (h) other additional services (ex: firewall, antivirus).
Satellite Television: Revenues from the satellite television service mainly result from: (a) basic and premium channel subscription packages; (b) equipment rental; (c) consumption of content (VOD); (d) service activation; and (e) sale of equipment.
Mobile broadband and voice services: Revenues from mobile broadband Internet access services and mobile voice services result mainly from monthly subscriptions and/or usage of the Internet and voice service, as well as the traffic associated with the type chosen by the client.
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 small, 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.
Revenue from penalties, due to the inherent uncertainties, only counts from when it is received, and the amount is disclosed as a contingent asset (Note 34).
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 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 alization. If uncertainty exists related to any of these aspects, the value is classified as Provisions (Note 2.14).
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 statement of comprehensive income 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-
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
At 31 December 2013 and 30 September 2014, 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:
| 31-12-2013 | 30-09-2014 | |
|---|---|---|
| US Dollar | 1.3791 | 1.2583 |
| British Pound | 0.8337 | 0.7773 |
| Mozambique Metical | 41.2000 | 39.6200 |
| Canadian Dollar | 1.4671 | 1.4058 |
| Swiss Franc | 1.2276 | 1.2063 |
| Real | 3.2576 | 3.0821 |
In the nine months ended at 30 September 2013 and 2014, 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 13 | 9M 14 | |
|---|---|---|
| Mozambique Metical | 39.6825 | 41.2729 |
| US Dollar | 1.3167 | 1.3555 |
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 statement of cash flows is prepared in accordance with the direct method. The Group classifies r 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.
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 period.
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.
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:
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
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 24. The recoverable values of the cashgenerating 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 statement of comprehensive income for each year.
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 isk 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 assets and liabilities, valuation techniques generally accepted in the market, based on market assumptions, are used.
The Group uses evaluation 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.
During the nine months ended on 30 September 2013 and 30 September 2014, no material errors relating to previous years were recognised. During the year ended 31 December 2013 occurred changes of accounting policies, whose impacts have resulted in a restatement of the financial statements for the nine months ended on 30 September 2013. These changes are described in Note 2.1..
Additionally, in result of the merger completed on 27 August 2013 (Note 4), the consolidated statement of comprehensive income, the consolidated statement of financial position and the consolidated statement of cash flows, for the the nine months ended on 30 September 2013, are not comparable with the ones for the nine months ended on 30 September 2014. A consolidated proforma statement of comprehensive income is presented in Note 4 assuming that all the companies merged on 27 August 2013 were consolidated at 1 January 2013.
On 27 August 2013, the merger operation by incorporation of Optimus SGPS into ZON occurred, through the transfer of all assets of the company Optimus SGPS to ZON, under the terms of the subparagraph a) of paragraph 4 of the Article 97 of the CSC, with effect from the date of the merger.
Following the merger, the Company performed an assessment of the fair value of assets acquired and assumed liabilities through this operation. In accordance with IFRS 3 - Business Combinations, the preliminary assessment of the fair value of assets acquired and assumed liabilities through this operation was subject to changes during the period of one year from the date of acquisition, which ended on 26 August 2014 (Note 2).
The detail of Optimus Group's net assets and Goodwill identified under this transaction, updated at 30 September 2014, is as follows:
| BOOK VALUE | ADJUSTMENTS TO FAIR VALUE |
FAIR VALUE | |
|---|---|---|---|
| ACQUIRED ASSETS | |||
| Cash and cash equivalents | 17,987 | - | 17,987 |
| Inventories | 19,125 | (1,384) | 17,741 |
| Accounts receivable and other assets | 224,165 | - | 224,165 |
| Intangible assets | 353,331 | 45,480 | 398,811 |
| Tangible assets | 569,441 | (62,616) | 506,825 |
| Deferred income tax assets | 100,976 | 25,258 | 126,234 |
| 1,285,025 | 6,738 | 1,291,763 | |
| ACQUIRED LIABILITIES | |||
| Borrowings | 452,362 | - | 452,362 |
| Accounts payable and other liabilities | 287,368 | 15,326 | 302,694 |
| Provisions | 35,224 | 77,215 | 112,439 |
| Deferred income tax liabilities | 1,142 | 10,997 | 12,139 |
| Share plan | 6,469 | 3,144 | 9,613 |
| 782,565 | 106,682 | 889,247 | |
| TOTAL NET ASSETS ACQUIRED | 502,460 | (99,944) | 402,516 |
| GOODWILL (NOTE 25) | 453,888 | ||
| ACQUISITION PRICE (NOTE 30) | 856,404 |
The fair value of net assets acquired was determined through several valuation methodologies for each type of asset or liability, based on the best information available. The main fair value adjustments made in this process were: (i) customer portfolio (23.4 million euros), which will be amortised linearly based on the estimated average time of customer retention; (ii) telecom licenses (12.7 million euros), which will be amortised over their the estimated useful life; (iii) infrastructure reconstruction and replacement equipment costs and other adjustments on basic equipment in the amount of 22.7 million euros; (iv) adjustment of 27.7 million euros to carrying amount of the assets falling within by the commitments made to the Competition Authority, under the merger operation, in particular, the agreement on an option to acquire the fiber network of Optimus; (v) contingent liabilities related to present obligations in the amount of 80.9 million euros, as permitted by IFRS 3, of which a portion, corresponding to tax contingencies, was recorded as a reduction of deferred tax assets (tax losses carried forward), and (vi) contractual obligations in the amount of 15.3 million euros related to longterm contracts whose prices are different from market prices.
The methodologies used in the main fair value adjustments were:
| VALUATION METHODOLOGIES | FAIR VALUE HIERARCHY |
|
|---|---|---|
| Customer portefolios | Discounted cash flows | Level 3 |
| Telecom licenses | Discounted cash flows | Level 3 |
| Buildings | Discounted cash flows | Level 3 |
| Rooftops and towers | Rebuilding costs | Level 2 |
| Basic equipment | Replacement costs | Level 2 |
| Contractual obligations | Comparison with today fees charged | Level 2 |
estimates, assumptions and judgments such as: (i customers used in the valuation of the customer portfolio; (ii) the average time of use of existing 2G/3G and LTE technologies and revenue growth as a result of the emergence of other new technologies, used in the valuation of the telecom licenses, among others. 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.
Several scenarios have been considered in the valuations and the sensitivity analyzes performed have not led to significant changes in the allocation of the fair value of assets and liabilities.
For the remaining assets and liabilities were not identified significant differences between the fair value and their book value.
As usual on mergers and acquisitions, also in this operation, there was a part of the acquisition price which was not possible to allocate to the fair value of some identified assets and liabilities, that was different elements, which cannot be individually quantified and isolated in a viable way and include, for example, synergies, qualified workforce and technical skills.
The contribution of Optimus group companies to the consolidated income for the period ended 30 September 2013, was positive, of 2,486 thousand euros, corresponding to the period of one month (since the control acquisition date on 27 August 2013). This contribution differs from the net income in the financial statements prepared by these entities, mainly because of the impacts in amortisation related to fair value adjustments and the standardization of certain accounting policies.
The detail of the referred contribution, after the elimination of NOS group intercompany transactions, is as follows:
| AMOUNT | |
|---|---|
| REVENUES: | |
| Sales and services rendered | 54,826 |
| Other operating revenues | 1,168 |
| 55,994 | |
| COSTS, LOSSES AND GAINS: | |
| Wages and salaries | 7,491 |
| Direct costs | 17,601 |
| Supplies and external services | 7,223 |
| Provisions and adjustments | (3,507) |
| Depreciation, amortisation and impairment losses | 9,920 |
| Other loss / (gains), net | 6,183 |
| 44,910 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES |
11,084 |
| Net other financial expenses / (income) | 1,688 |
| INCOME BEFORE TAXES | 9,396 |
| Income taxes | 6,910 |
| NET CONSOLIDATED INCOME | 2,486 |
If the merged companies had been consolidated from 1 January 2013, the amounts of consolidated operating revenues and net income before non-controlling interests, after elimination of the as follows:
for the Nine Months ended 30 September 2013
| AMOUNT | |
|---|---|
| REVENUES: | |
| Sales and services rendered | 1,058,158 |
| Other operating revenues | 12,387 |
| 1,070,545 | |
| COSTS, LOSSES AND GAINS: | |
| Wages and salaries | 71,458 |
| Direct costs | 305,902 |
| Supplies and external services | 143,001 |
| Provisions and adjustments | 1,302 |
| Depreciation, amortisation and impairment losses | 252,561 |
| Other loss / (gains), net | 162,361 |
| 936,585 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 133,960 |
| Net other financial expenses / (income) | 52,907 |
| INCOME BEFORE TAXES | 81,053 |
| Income taxes | 3,980 |
| NET CONSOLIDATED INCOME | 77,074 |
The main variations occurred in the several NOS consolidated financial statements items, result mainly from the entry in the consolidation perimeter of the companies merged in 27 August 2013 (Note 1). 1 month of operations.
During the nine months ended on 30 September 2014, the changes in the consolidated perimeter were as follows:
i) on 15 May 2014 it was constituted NOS Communications S.à.r.l (Annexe A));
ii) on 16 May 2014 the Company completed a merger operation by incorporation of ZON TV Cabo Portugal, S.A. in Optimus Comunicações, S.A., thereafter named NOS Comunicações, S.A.. This
iii) on 24 September 2014, ZON TV Cabo, SGPS, S.A. and ZON Audiovisual, SGPS S.A. merged into any impact on the consolidated financial statements;
to th may be reduced, until a maximum amount of 5,416 thousand euros, as a result of the gap between the present value of the revenues agreed in the contract and the present value of the revenues that will be obtained until 31 December 2022.
Following the acquisition, the Company performed a preliminary assessment of the fair value of assets acquired and assumed liabilities through this operation. In accordance with IFRS 3 - Business Combinations, the preliminary assessment of the fair value of assets acquired and assumed liabilities through this operation may be subject to changes during the period of one year from the date of acquisition. Nevertheless, the Company does not expect significant changes in its financial position as a result from any changes to the allocation made.
The detail of Mainroad's net assets and Goodwill identified under this transaction, is as follows:
| Fair Value Allocation | |||||
|---|---|---|---|---|---|
| BOOK VALUE | ADJUSTMENTS TO FAIR VALUE |
FAIR VALUE | |||
| ACQUIRED ASSETS | |||||
| Cash and cash equivalents | 646 | - | 646 | ||
| Accounts receivable and other assets | 3,897 | - | 3,897 | ||
| Intangible assets | 171 | 910 | 1,081 | ||
| Tangible assets | 2,438 | (70) | 2,368 | ||
| Deferred income tax assets | 170 | 107 | 277 | ||
| 7,321 | 947 | 8,268 | |||
| ACQUIRED LIABILITIES | |||||
| Borrowings | 1,447 | - | 1,447 | ||
| Accounts payable and other liabilities | 5,630 | - | 5,630 | ||
| Provisions | 316 | 421 | 737 | ||
| Deferred income tax liabilities | - | 250 | 250 | ||
| 7,393 | 671 | 8,064 | |||
| TOTAL NET ASSETS ACQUIRED | (72) | 276 | 204 | ||
| GOODWILL (NOTE 25) | 12,416 | ||||
| ACQUISITION PRICE (NOTE 30) | 12,620 | ||||
| ACQUISITON OF MAINROAD'S DEBT | 1,380 | ||||
| TOTAL PAID | 14,000 |
The fair value of net assets acquired was determined through several valuation methodologies for each type of asset or liability, based on the best information available. The main fair value adjustments made in this process were: (i) customer portfolio (1.1 million euros), which will be amortised linearly during 5 years; and (ii) contingent liabilities related to present obligations in the amount of 0.4 million euros, as permitted by IFRS 3.
counted cash flows model (Level 3 in fair value hierarchy).
For the remaining assets and liabilities there were not identified significant differences between the fair value and their book value.
As usual on mergers and acquisitions, also in this operation, there was a part of the acquisition price which was not possible to allocate to the fair value of some identified assets and liabilities, that was different elements, which cannot be individually quantified and isolated in a viable way and include, for example, synergies, qualified workforce and technical skills.
The contribution of Mainroad to the consolidated income for the period ended 30 September 2014 is null. If the company had been consolidated from 1 January 2014, the amounts of consolidated operating revenues and net income before non-controlling interests, after elimination of the s:
| AMOUNT | |
|---|---|
| REVENUES: | |
| Sales and services rendered | 1,025,536 |
| Other operating revenues | 12,046 |
| 1,037,582 | |
| COSTS, LOSSES AND GAINS: | |
| Wages and salaries | 64,557 |
| Direct costs | 296,693 |
| Support services | 67,909 |
| Supplies and external services | 137,721 |
| Provisions and adjustments | (5,058) |
| Depreciation, amortisation and impairment losses | 252,158 |
| Other loss / (gains), net | 99,756 |
| 913,736 | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES |
123,846 |
| Net other financial expenses / (income) | 44,336 |
| INCOME BEFORE TAXES | 79,510 |
| Income taxes | 16,243 |
| NET CONSOLIDATED INCOME | 63,267 |
The business segments are as follows:
The results by segment for the nine months ended at 30 September 2013 and 2014 are shown below:
| TELCO | AUDIOVISUALS | GROUP | ||||
|---|---|---|---|---|---|---|
| r d QUARTER 13 3 |
9M 13 | r d QUARTER 13 3 |
9M 13 | r d QUARTER 13 3 |
9M 13 | |
| Total segment revenue | 233,874 | 588,961 | 26,915 | 74,824 | 260,789 | 663,785 |
| Inter-segment revenue | (5,044) | (14,161) | (4,152) | (13,272) | (9,197) | (27,433) |
| SALES AND SERVICES RENDERED | 228,830 | 574,800 | 22,763 | 61,552 | 251,594 | 636,351 |
| OPERATIONAL INCOME BY SEGMENT | 8,977 | 66,627 | 860 | 2,453 | 9,837 | 69,080 |
| Net interest expense and other | 12,450 | 33,789 | 1,053 | 2,153 | 13,503 | 35,941 |
| Loss / (Gains) in financial assets | 800 | 1,300 | 5 | 30 | 805 | 1,330 |
| INCOME BEFORE TAXES | (4,273) | 31,538 | (198) | 270 | (4,471) | 31,808 |
| Income tax expense | (3,339) | 6,741 | 49 | 593 | (3,290) | 7,335 |
| NET INCOME | (934) | 24,797 | (247) | (323) | (1,181) | 24,474 |
| OTHER COSTS: | ||||||
| Depreciation, amortisation and impairment | 52,683 | 137,934 | 7,162 | 21,511 | 59,845 | 159,445 |
| Provisions and adjustments | (217) | 4,346 | 1 8 |
2,874 | (198) | 7,220 |
| Costs / (revenues) non-recurrent | 31,338 | 30,933 | 938 | 809 | 32,276 | 31,741 |
| TELCO | AUDIOVISUALS | GROUP | ||||
|---|---|---|---|---|---|---|
| r d QUARTER 14 3 |
9M 14 | r d QUARTER 14 3 |
9M 14 | r d QUARTER 14 3 |
9M 14 | |
| Total segment revenue | 333,321 | 988,432 | 24,326 | 70,251 | 357,647 | 1,058,683 |
| Inter-segment revenue | (5,310) | (14,665) | (4,519) | (13,881) | (9,829) | (28,546) |
| SALES AND SERVICES RENDERED | 328,011 | 973,767 | 19,807 | 56,370 | 347,818 | 1,030,137 |
| OPERATIONAL INCOME BY SEGMENT | 36,202 | 122,887 | 1,446 | 322 | 37,648 | 123,209 |
| Net interest expense and other | 14,188 | 41,163 | 685 | 2,135 | 14,873 | 43,298 |
| Loss / (Gains) in financial assets | (1) | 905 | 1 2 |
35 | 1 1 |
940 |
| INCOME BEFORE TAXES | 22,015 | 80,819 | 749 | (1,848) | 22,764 | 78,971 |
| Income tax expense | 3,860 | 17,433 | 145 | (1,307) | 4,005 | 16,126 |
| NET INCOME | 18,155 | 63,386 | 604 | (541) | 18,759 | 62,845 |
| OTHER COSTS: | ||||||
| Depreciation, amortisation and impairment | 73,095 | 224,749 | 8,444 | 26,893 | 81,539 | 251,642 |
| Provisions and adjustments | (4,379) | (5,009) | (48) | (91) | (4,427) | (5,100) |
| Costs / (revenues) non-recurrent | 19,317 | 34,599 | (1,039) | (860) | 18,278 | 33,739 |
Inter-segment transactions are performed on market terms and conditions in a comparable way to transactions performed with third parties.
Assets and liabilities by segment, as well as investments in tangible fixed assets and intangible assets at 31 December 2013, as a result of the policies changes mentioned on Note 1, are shown below:
| TELCO | AUDIO VISUALS |
ELIMINATIONS | NOT ALLOCATED |
GROUP | |
|---|---|---|---|---|---|
| Assets | 2,729,833 | 126,137 | (144,051) | 186,340 | 2,898,258 |
| Investment in associated companies | 29,927 | 1,687 | - | - | 31,614 |
| TOTAL ASSETS | 2,759,760 | 127,824 | (144,051) | 186,340 | 2,929,872 |
| LIABILITIES | 735,903 | 120,682 | (144,051) | 1,157,126 | 1,869,659 |
| INVESTMENT IN TANGIBLE ASSETS | 143,684 | 3,067 | - | - | 146,751 |
| INVESTMENT IN INTANGIBLE ASSETS | 38,955 | 26,617 | - | - | 65,572 |
At 31 December 2013, restated assets and liabilities not allocated to segments are reconciled with total assets and liabilities as follows:
| ASSETS | LIABILITIES | |
|---|---|---|
| NOT ALLOCATED: | ||
| Deferred tax (Note 16) | 156,467 | 15,456 |
| Income tax expense (Note 22) | 9,065 | - |
| Borrowings - current (Note 27) | - | 213,431 |
| Borrowings - non current (Note 27) | - | 928,239 |
| Available-for-sale financial assets (Note 24) | 19,329 | - |
| Non-current assets held-for-sale | 678 | - |
| Investment property | 801 | - |
| 186,340 | 1,157,126 |
Assets and liabilities by segment, and investments in tangible fixed assets and intangible assets at 30 September 2014, are shown below:
| TELCO | AUDIO VISUALS |
ELIMINATIONS | NOT ALLOCATED |
GROUP | |
|---|---|---|---|---|---|
| Assets | 2,713,290 | 77,063 | (64,909) | 163,928 | 2,889,372 |
| Investment in associated companies | 28,212 | 2,656 | - | - | 30,868 |
| TOTAL ASSETS | 2,741,502 | 79,719 | (64,909) | 163,928 | 2,920,241 |
| LIABILITIES | 727,478 | 77,884 | (64,909) | 1,131,644 | 1,872,097 |
| INVESTMENT IN TANGIBLE ASSETS | 143,754 | 5,654 | - | - | 149,408 |
| INVESTMENT IN INTANGIBLE ASSETS | 62,634 | 19,829 | - | - | 82,463 |
At 30 September 2014, assets and liabilities not allocated to segments are reconciled with total assets and liabilities as follows:
| ASSETS | LIABILITIES | |
|---|---|---|
| NOT ALLOCATED: | ||
| Deferred tax (Note 16) | 138,416 | 16,560 |
| Income tax expense (Note 22) | 5,646 | - |
| Borrowings - current (Note 27) | - | 303,217 |
| Borrowings - non current (Note 27) | - | 811,867 |
| Available-for-sale financial assets (Note 24) | 18,423 | - |
| Non-current assets held-for-sale | 678 | - |
| Investment property | 765 | - |
| 163,928 | 1,131,644 |
contributions of the companies merged on 27 August 2013 (Note 4).
Consolidated operating revenues for the three months and nine months ended on 30 September 2013 and 2014 are distributed as follows:
| Consolidated Operating Revenues | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| SERVICES RENDERED | ||||
| Telco i) | 222,854 | 564,730 | 313,627 | 933,860 |
| Audiovisuals and cinema exhibition ii) | 17,733 | 47,003 | 15,647 | 43,410 |
| 240,586 | 611,733 | 329,274 | 977,270 | |
| SALES: | ||||
| Telco iii) | 3,749 | 5,903 | 12,007 | 28,527 |
| Audiovisuals and cinema exhibition iv) | 4,930 | 14,022 | 3,856 | 11,921 |
| 8,678 | 19,925 | 15,863 | 40,448 | |
| OTHER OPERATING REVENUES: | ||||
| Telco | 2,228 | 4,167 | 2,377 | 11,380 |
| Audiovisuals and cinema exhibition | 100 | 527 | 304 | 1,039 |
| 2,329 | 4,694 | 2,681 | 12,419 | |
| 251,594 | 636,351 | 347,818 | 1,030,137 |
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 (ex: firewall, antivirus).
ii) This item mainly includes:
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.
The main changes in the item operating revenues result mainly from the entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4). Therefore, the operating revenue in the nine months period ended on 30 September 2013 includes only one month of revenues from the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Wages and Salaries | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| Remuneration | 13,664 | 33,221 | 16,486 | 46,705 |
| Social taxes | 2,751 | 6,768 | 4,125 | 12,221 |
| Social benefits | 287 | 659 | 331 | 1,219 |
| Other | 190 | 380 | 409 | 981 |
| 16,892 | 41,028 | 21,351 | 61,126 |
In the nine months ended at 30 September 2013 and 2014, the average number of employees of the companies included in the consolidation was 1,442 and 2,366, respectively. At the end of the nine months ended at 30 September 2014, the number of employees of the companies included in the consolidation was 2,384.
The main changes in the item wages and salaries result mainly from the entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4). Therefore, the wages and salaries in the nine months period ended on 30 September 2013 includes only one month of costs from the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Direct Costs | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| Exhibition costs | 39,446 | 118,334 | 37,228 | 114,066 |
| Traffic costs | 23,774 | 34,877 | 47,301 | 135,122 |
| Capacity costs | 8,281 | 19,659 | 11,448 | 35,323 |
| Shared advertising revenues | 2,263 | 7,016 | 2,732 | 9,332 |
| Others | 1,424 | 3,230 | 984 | 3,055 |
| 75,188 | 183,116 | 99,693 | 296,898 |
The main changes in the item direct costs result mainly from the entrance in the consolidation scope period ended on 30 September 2013 includes only one month of costs from the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Cost of Products Sold | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| Costs of products sold | 4,673 | 7,444 | 14,628 | 34,693 |
| Inventories impairment | (266) | (584) | 272 | 2,337 |
| 4,407 | 6,860 | 14,900 | 37,030 |
The main changes in the item cost of products sold result mainly from the entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4). Therefore, the cost of costs from the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Support Services and Supplies and External Services | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| SUPPORT SERVICES: | ||||
| Call centers and customer support | 5,430 | 15,256 | 8,861 | 25,194 |
| Commercial and technical support | 4,679 | 13,837 | 1,762 | 10,497 |
| Information systems | 2,409 | 6,603 | 3,273 | 10,920 |
| Administrative support and other | 3,004 | 6,442 | 7,811 | 19,213 |
| 15,522 | 42,138 | 21,707 | 65,824 | |
| SUPPLIES AND EXTERNAL SERVICES: | ||||
| Maintenance and repair | 11,987 | 24,929 | 8,370 | 31,478 |
| Rentals | 7,175 | 17,671 | 10,432 | 31,401 |
| Commissions | 2,395 | 4,115 | 5,329 | 15,687 |
| Professional services | 271 | 7,253 | 3,550 | 12,369 |
| Electricity | 2,844 | 6,478 | 3,623 | 12,675 |
| Installation and removal of terminal equipment | 1,256 | 3,444 | 1,812 | 5,023 |
| Communications | 1,814 | 4,823 | 2,234 | 5,883 |
| Fees | 405 | 963 | 2,551 | 5,245 |
| Travel and accommodation | 506 | 1,181 | 997 | 2,686 |
| Other supplies and external services | 2,990 | 8,434 | 4,624 | 14,369 |
| 31,644 | 79,291 | 43,522 | 136,816 |
The changes in the items support services and supplies and external services result mainly from the entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4). Therefore, 2013 include only one month of costs from the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Provisions and Adjustments | |||||
|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | ||
| Provisions (Note 29) | (3,807) | (4,177) | (4,249) | (4,936) | |
| Impairment of account receivables - trade (Note 21) | 3,490 | 11,313 | (301) | (568) | |
| Impairment of account receivables - other | 122 | 89 | 124 | 407 | |
| Debts recovery | (2) | (6) | (1) | (3) | |
| (198) | 7,220 | (4,427) | (5,100) |
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Losses/(Gains) of Affiliated Companies | |||||
|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | ||
| EQUITY ACCOUNTING (NOTE 23) | |||||
| Sport TV | 710 | 2,627 | 1,045 | 1,790 | |
| Dreamia | 858 | (254) | (236) | (868) | |
| Finstar | (2,145) | (4,609) | (4,730) | (12,179) | |
| Mstar | (166) | (311) | (83) | (333) | |
| Upstar | (3) | (12) | (8) | (15) | |
| Other | 66 | 224 | (12) | (28) | |
| (681) | (2,335) | (4,024) | (11,633) |
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Depreciation, Amortisation and Impairment Losses | |||||
|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | ||
| INTANGIBLE ASSETS: | |||||
| Industrial property and other rights | 19,054 | 50,631 | 31,541 | 95,107 | |
| Other intangible assets | 415 | 1,229 | 579 | 1,485 | |
| 19,469 | 51,860 | 32,120 | 96,592 | ||
| TANGIBLE ASSETS: | |||||
| Buildings and other constructions | 1,437 | 2,999 | 2,288 | 8,085 | |
| Basic equipment | 34,338 | 90,971 | 42,606 | 131,359 | |
| Transportation equipment | 276 | 957 | 358 | 781 | |
| Administrative equipment | 3,757 | 11,052 | 3,584 | 13,167 | |
| Other tangible assets | 568 | 1,605 | 585 | 1,658 | |
| 40,376 | 107,585 | 49,420 | 155,050 | ||
| 59,845 | 159,445 | 81,539 | 251,642 |
The variations occurred in the items above result from the entrance in the consolidation scope of the companies merged on 27 August 2013 (Note 4). Therefore, depreciation, amortisation and impairment the merged companies.
In the three months and nine months ended on 30 September 2013 and 2014, finance costs and other net financial costs were composed as follows:
| Financing Costs and Net Other Financial Expenses / (Income) | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 |
9M 13 | r | 9M 14 | |
| RESTATED | RESTATED | d QUARTER 14 3 |
||
| FINANCING COSTS: | ||||
| INTEREST EXPENSE: | ||||
| Borrowings | 7,990 | 21,595 | 7,688 | 24,390 |
| Derivatives | 901 | 2,655 | 1,248 | 3,075 |
| Finance leases | 1,565 | 4,502 | 1,490 | 4,537 |
| Other | 48 | 9 8 |
908 | 1,553 |
| 10,505 | 28,850 | 11,334 | 33,555 | |
| INTEREST EARNED: | (1,877) | (6,587) | (2,079) | (5,712) |
| 8,629 | 22,263 | 9,255 | 27,843 | |
| NET OTHER FINANCIAL EXPENSES / (INCOME) | ||||
| Comissions and guarantees | 3,708 | 11,135 | 3,902 | 11,492 |
| Other | 1,115 | 2,451 | 1,627 | 3,864 |
| 4,823 | 13,586 | 5,529 | 15,356 |
The reduction of the interest earned with deposits results mainly from the decrease of the average amount of deposits.
In the three months and nine months ended on 30 September 2013 and 2014, this item was composed as follows:
| Losses/(Gains) in Financial Assets | |||||
|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | ||
| Impairment losses of FICA Fund (Note 24) | 800 | 1,300 | - | 900 | |
| Other | 5 | 30 | 1 1 |
41 | |
| 805 | 1,330 | 11 | 940 |
During the nine months ended at 30 September 2014, NOS and its associated companies are subject to IRC - Corporate Income Tax - at the rate of 23% (18.4% in the case of NOS Açores), plus IRC surcharge at the maximum rate of 1.5% on taxable profit, giving an aggregate rate of approximately 24.5%. Following the introduction of the austerity measures approved by Law 66-B/2012 of 31 December which set out the 2013 State Budget, this rate was raised in 3% on the amount of a on euros and 7.5 million euros, and in 5% on the amount of a Additionally, in the measures approving the IRC restructuration, published by Law 2/2014 of 16 January, was added a new level to the IRC surcharge
The current income tax provision for the mid-term periods, in accordance with IAS 34, was determined using the estimated income tax rate, according with the annual estimated results.
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 fulfil the requirements of Article 69 of the IRC Code.
The companies covered by the RETGS in 2014 are:
Lusomundo Imobiliária 2
Lusomundo SII
Under current legislation, tax declarations are subject to review and correction by the tax authorities for a period of four years (five years in the case of Social Security), except where tax losses have occurred (where the period is five or six years) 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 2014.
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 2013 and 2014 were as follows:
| 31-12-2012 | CHANGES IN THE |
DEFERRED TAXES OF THE PERIOD |
30-09-2013 | ||
|---|---|---|---|---|---|
| RESTATED | CONSOLIDATED SCOPE (NOTE 4) |
INCOME (NOTE B) |
EQUITY (NOTE 31) |
RESTATED | |
| DEFERRED INCOME TAX ASSETS: | |||||
| Doubtful accounts receivable | 5,342 | 11,163 | 511 | - | 17,016 |
| Inventories | 1,490 | 678 | (436) | - | 1,732 |
| Other provision and adjustments | 27,864 | 68,625 | 327 | - | 96,816 |
| Intragroup gains | 15,881 | 18,241 | (2,136) | - | 31,986 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
- | 15,700 | (115) | - | 15,585 |
| Derivatives | 1,616 | - | - | (329) | 1,288 |
| Fiscal incentives | - | 11,827 | - | - | 11,827 |
| 52,193 | 126,234 | (1,849) | (329) | 176,250 | |
| DEFERRED INCOME TAX LIABILITIES: | |||||
| Reavaluation of fixed assets | 2,776 | - | - | - | 2,776 |
| Capitalization of subscriber acquisition costs | 4,712 | - | (667) | - | 4,045 |
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
- | 10,997 | 660 | - | 11,657 |
| Other provisions and adjustments | - | 1,142 | - | - | 1,142 |
| 7,488 | 12,139 | (7) | - | 19,620 | |
| NET DEFERRED TAX | 44,705 | 114,095 | (1,842) | (329) | 156,630 |
| 31-12-2013 | CHANGES IN THE |
DEFERRED TAXES OF THE PERIOD |
|||
|---|---|---|---|---|---|
| RESTATED | CONSOLIDATED SCOPE (NOTE 4) |
INCOME (NOTE B) |
EQUITY (NOTE 31) |
30-09-2014 | |
| DEFERRED INCOME TAX ASSETS: | |||||
| Doubtful accounts receivable | 16,073 | - | (8,013) | - | 8,060 |
| Inventories | 3,216 | 910 | - | 4,126 | |
| Other provision and adjustments | 81,869 | 149 | (6,818) | - | 75,200 |
| Intragroup gains | 27,876 | - | (2,077) | - | 25,799 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
12,347 | 63 | (1,816) | - | 10,594 |
| Derivatives | 693 | - | - | (27) | 666 |
| Incentives | 14,393 | 65 | (487) | - | 13,971 |
| 156,467 | 277 | (18,301) | (27) | 138,416 | |
| DEFERRED INCOME TAX LIABILITIES: | |||||
| Reavaluation of fixed assets | 1,415 | - | (1,341) | - | 74 |
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
13,134 | 250 | 789 | - | 14,173 |
| Derivatives | - | 87 | 87 | ||
| Other provision and adjustments | 907 | - | 1,319 | - | 2,226 |
| 15,456 | 250 | 767 | 87 | 16,560 | |
| NET DEFERRED TAX | 141,011 | 2 7 |
(19,068) | (114) | 121,856 |
At 30 September 2014, 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 57.5 million euros; ii) temporary
differences generated with adjustments of conversion to IAS/IFRS at 31 December 2009, amounted to 1.7 million euros; and iii) other provisions amounted to 15.9 million euros.
At 30 September 2014, the deferred tax liability related to the revaluation of assets related to the allocation of fair value of the assets acquired in the merger is related to the appreciation of portfolio, telecommunications licenses and other assets of Optimus Group companies.
At 30 September 2014 were not recognized deferred tax assets in the amount of 14 million euros related to: i) tax losses of 9.9 million euros, originated in the years 2009 and 2013, not recorded due to the deduction of tax provisions (Note 29), ii) tax incentives amounting to 3.7 million euros, and iii) temporary differences in the amount of 0.3 million euros.
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
At 30 September 2014, the tax rate used to calculate the deferred tax assets relating to tax losses carried forward was 23%. In the case of temporary differences, the rate used was 24.5% increased to a maximum of 2.95% of state surcharge when understood as likely the taxation of temporary differences in the estimated period of application of the state surcharge. 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 current legislation in Portugal, tax losses generated up to 2009, or in 2010 and 2011, and from 2012 onwards may be carried forward for a period of six years, four years and five 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 2013 and 70% of taxable profit in the following years.
In the three months and nine months ended on 30 September 2013 and 2014, the reconciliation between the nominal and effective rates of tax was as follows:
| Reconciliation between the Nominal and Effective Tax Rates | ||||||
|---|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |||
| Income before taxes | (4,472) | 31,808 | 22,765 | 78,971 | ||
| Statutory tax rate | 26.5% | 26.5% | 24.5% | 24.5% | ||
| ESTIMATED TAX | (1,185) | 8,429 | 5,578 | 19,348 | ||
| Permanent differences i) | (180) | (619) | (538) | (2,369) | ||
| Underestimated/ (Overestimated) corporate tax | - | 537 | (16) | (2,760) | ||
| Fiscal benefits ii) | (2,083) | (2,733) | (1,575) | (2,513) | ||
| State surcharge | (111) | 795 | 733 | 3,157 | ||
| Autonomous taxation | 217 | 651 | 344 | 1,031 | ||
| Provisions (Note 29) | - | - | 9 2 |
944 | ||
| Others | 53 | 275 | (612) | (712) | ||
| INCOME TAX | (3,290) | 7,335 | 4,005 | 16,126 | ||
| Effective Income tax rate for the period | 73.6% | 23.1% | 17.6% | 20.4% | ||
| Income tax | (4,273) | 5,493 | (8,471) | (2,942) | ||
| Deferred tax | 983 | 1,842 | 12,476 | 19,068 | ||
| (3,290) | 7,335 | 4,005 | 16,126 |
i) At 30 September 2013 and 2014 the permanent differences were composed as follows:
| Permanent Differences | ||||
|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | |
| Equity method (Note 12) | (681) | (2,335) | (4,024) | (11,633) |
| Other | - | - | 1,828 | 1,962 |
| (681) | (2,335) | (2,196) | (9,671) | |
| 26.5% | 26.5% | 24.5% | 24.5% | |
| (180) | (619) | (538) | (2,369) |
ii) The application by Group companies of the 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.
Earnings per share for the three months and nine months ended on 30 September 2013 and 2014 were calculated as follow:
| Net Earnings Per Share | |||||
|---|---|---|---|---|---|
| r d QUARTER 13 3 RESTATED |
9M 13 RESTATED |
r d QUARTER 14 3 |
9M 14 | ||
| Net income attributable to equity holders of the parent | (1,393) | 23,904 | 18,762 | 62,438 | |
| Number of ordinary shares outstanding during the period (weighted average) |
384,975,709 | 334,425,187 | 513,882,998 | 514,214,240 | |
| Basic earnings per share - euros | (0.00) | 0.07 | 0.04 | 0.12 | |
| Diluted earnings per share - euros | (0.00) | 0.07 | 0.04 | 0.12 |
In the presented three months and nine months ended on 30 September 2013 and 2014 there were no diluting effects on net earnings per share, so the diluted earnings per share are equal to the basic earnings per share.
The General Meeting of Shareholders held on 23 April 2014 approved a proposal by the Board of Directors for payment of an ordinary dividend per share of 0.12 euros, totaling 61,819 thousand euros. The dividend attributable to own shares amounted to about one thousand euros.
| DIVIDENDS | |
|---|---|
| Dividends | 61,819 |
| Dividends of own shares | (1) |
| 61,818 |
In the first half of 2014, dividends totaling 194 thousand euros were paid to the minority shareholders of NOS Madeira.
The General Meeting of Shareholders held on 24 April 2013 approved a proposal by the Board of Directors for payment of an ordinary dividend per share of 0.12 euros, totaling 37,092 thousand euros. The dividend attributable to own shares amounted to about 48 thousand euros.
| DIVIDENDS | |
|---|---|
| Dividends | 37,092 |
| Dividends of own shares | (48) |
| 37,044 |
In the first half of 2013, dividends totaling 229 thousand euros were paid to the minority shareholders of NOS Madeira.
The accounting policies set out in IAS 39 for financial instruments were applied to the following items:
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE FOR-SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO MATURITY |
DERIVATIVES | |
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents (Note 20) | 74,380 | - | - - |
|
| Accounts receivable - trade (Note 21) | 276,630 | - | - - |
|
| Accounts receivable - other | 33,235 | - | - - |
|
| Available-for-sale financial assets (Note 24) | - | 19,329 | - - |
|
| TOTAL FINANCIAL ASSETS | 384,245 | 19,329 | - - |
|
| LIABILITIES | ||||
| Borrowings (Note 27) | - | - | - - |
|
| Accounts payable - trade (Note 28) | - | - | - - |
|
| Accounts payable - other | - | - | - - |
|
| Accrued expenses | - | - | - - |
|
| Derivatives financial instruments (Note 31) | - | - | - 2,814 |
|
| TOTAL FINANCIAL LIABILITIES | - | - | - 2,814 |
|
| OTHER FINANCIAL |
TOTAL FINANCIAL ASSETS AND |
NON FINANCIAL ASSETS AND |
TOTAL | |
| LIABILITIES | LIABILITIES | LIABILITIES | ||
| ASSETS | ||||
| Cash and cash equivalents (Note 20) | - | 74,380 | - | 74,380 |
| Accounts receivable - trade (Note 21) | - | 276,630 | - | 276,630 |
| Accounts receivable - other | - | 33,235 | 4,937 | 38,172 |
| Available-for-sale financial assets (Note 24) | - | 19,329 | - | 19,329 |
| TOTAL FINANCIAL ASSETS | - | 403,574 | 4,937 | 408,511 |
| LIABILITIES | ||||
| Borrowings (Note 27) | 1,141,670 | 1,141,670 | - | 1,141,670 |
| Accounts payable - trade (Note 28) | 296,715 | 296,715 | 108 | 296,823 |
| Accounts payable - other | 70,748 | 70,748 | - | 70,748 |
| Accrued expenses | 129,901 | 129,901 | - | 129,901 |
| Derivatives financial instruments (Note 31) | - | 2,814 | - | 2,814 |
| TOTAL FINANCIAL LIABILITIES | 1,639,034 | 1,641,848 | 108 | 1,641,956 |
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE FOR-SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO MATURITY |
DERIVATIVES | |
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents (Note 20) | 40,862 | - | - - |
|
| Accounts receivable - trade (Note 21) | 311,998 | - | - - |
|
| Accounts receivable - other | 24,390 | - | - - |
|
| Available-for-sale financial assets (Note 24) | - | 18,423 | - - |
|
| Derivatives financial instruments (Note 31) | - | - | - 356 |
|
| TOTAL FINANCIAL ASSETS | 377,250 | 18,423 | - 356 |
|
| LIABILITIES | ||||
| Borrowings (Note 27) | - | - | - - |
|
| Accounts payable - trade (Note 28) | - | - | - - |
|
| Accounts payable - other | - | - | - - |
|
| Accrued expenses | - | - | - - |
|
| Derivatives financial instruments (Note 31) | - | - | - 1,767 |
|
| TOTAL FINANCIAL LIABILITIES | - | - | - 1,767 |
| OTHER FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents (Note 20) | - | 40,862 | - | 40,862 |
| Accounts receivable - trade (Note 21) | - | 311,998 | - | 311,998 |
| Accounts receivable - other | - | 24,390 | 10,197 | 34,587 |
| Available-for-sale financial assets (Note 24) | - | 18,423 | - | 18,423 |
| Derivatives financial instruments (Note 31) | - | 356 | - | 356 |
| TOTAL FINANCIAL ASSETS | - | 396,029 | 10,197 | 406,226 |
| LIABILITIES | ||||
| Borrowings (Note 27) | 1,115,084 | 1,115,084 | - | 1,115,084 |
| Accounts payable - trade (Note 28) | 314,347 | 314,347 | 143 | 314,490 |
| Accounts payable - other | 62,226 | 62,226 | - | 62,226 |
| Accrued expenses | 154,295 | 154,295 | - | 154,295 |
| Derivatives financial instruments (Note 31) | - | 1,767 | - | 1,767 |
| TOTAL FINANCIAL LIABILITIES | 1,645,952 | 1,647,719 | 143 | 1,647,862 |
Considering its nature, the balances of the amounts to be paid and received to/from state and other public enti 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.
economical and judicial risks, which are described in the Management Report.
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Cash | 1,085 | 527 |
| Deposits | 13,093 | 39,348 |
| Other deposits i) | 60,202 | 987 |
| 74,380 | 40,862 |
i) At 30 September 2014, other deposits have short-term maturities and bear interest at normal market rates.
At 31 December 2013 and 30 September 2014, this item was composed as follows:
| 31-12-2013 | 30-09-2014 | |
|---|---|---|
| RESTATED | ||
| Trade receivables | 216,374 | 247,193 |
| Doubtful accounts for trade receivables | 180,609 | 179,965 |
| Unbilled revenues | 60,030 | 64,805 |
| 457,013 | 491,963 | |
| Impairment of trade receivable | (180,383) | (179,965) |
| 276,630 | 311,998 |
The summary of movements in impairment adjustments is as follows:
| 9M 13 | ||
|---|---|---|
| RESTATED | 9M 14 | |
| AS AT JANUARY 1 | 131,763 | 180,383 |
| Change in the consolidation scope (Note 4) | 28,468 | 137 |
| Increases and decreases (Note 11) | 11,313 | (568) |
| Receivables written off and other | 1,823 | 1 3 |
| AS AT SEPTEMBER 30 | 173,367 | 179,965 |
At 31 December 2013 and 30 September 2014, this item was composed as follows:
| 31-12-2013 | |||||
|---|---|---|---|---|---|
| RESTATED | 30-09-2014 | ||||
| RECEIVABLE | PAYABLE | RECEIVABLE | PAYABLE | ||
| CURRENT | |||||
| Value-added tax | 2,337 | 17,954 | 1,401 | 13,677 | |
| Income taxes | 9,065 | - | 5,646 | - | |
| Social Security contributions | - | 1,957 | - | 1,876 | |
| Personnel income tax witholdings | - | 2,107 | - | 1,846 | |
| Other | 428 | 974 | 430 | 428 | |
| 11,830 | 22,992 | 7,477 | 17,827 | ||
| NON CURRENT | |||||
| Tax authorities (Note 34.3) | 7,705 | - | 7,640 | - | |
| Provision | (3,479) | - | (3,408) | - | |
| 4,226 | - | 4,232 | - | ||
| 16,056 | 22,992 | 11,709 | 17,827 |
At 31 December 2013 and 30 September 2014 the amounts of IRC (Corporate Income Tax) receivable and payable were composed as follows:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Estimated current tax on income i) | (7,365) | 1,156 |
| Payments on account | 12,838 | 3,286 |
| Withholding income taxes | 2,856 | 692 |
| Other | 736 | 512 |
| 9,065 | 5,646 |
i) the amount relating to the estimated current tax on income was recorded in the following items:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Income taxes | (6,148) | 1,491 |
| Change in the consolidation scope (Note 4) | (1,500) | (157) |
| Other | 283 | (178) |
| (7,365) | 1,156 |
At 31 December 2013 and 30 September 2014, this item was composed as follows:
Investments in Jointly Controlled Companies and Associated Companies
| 31-12-2013 RESTATED |
30-09-2014 | |
|---|---|---|
| INVESTMENTS - EQUITY ACCOUNTING | ||
| Sport TV | 29,769 | 28,101 |
| Dreamia | 1,687 | 2,631 |
| Finstar | (13,466) | (1,617) |
| Mstar | (321) | (104) |
| Upstar | 53 | 75 |
| Distodo | (125) | (122) |
| Canal 20 TV, S.A. | 5 | (1) |
| ZON II | 50 | - |
| ZON III | 50 | - |
| East Star | - | 36 |
| Big Picture 2 Films | - | 25 |
| 17,702 | 29,024 | |
| ASSETS | 31,614 | 30,868 |
| LIABILITIES (NOTE 29) | (13,912) | (1,844) |
months ended as at 30 September 2013 and 2014 were as follows:
| 9M 13 | ||
|---|---|---|
| RESTATED | 9M 14 | |
| AS AT JANUARY 1 | 13,539 | 17,702 |
| Gain / (loss) for the year (Note 12) | 2,335 | 11,633 |
| Dissolutions | - | (100) |
| Entry of companies | - | 36 |
| Changes in equity i) | 350 | (247) |
| AS AT SEPTEMBER 30 | 16,224 | 29,024 |
i) Amounts related to changes in equity of the companies registered by the equity method of consolidation is 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 in the year ended at 31 December 2013 and in the nine months ended at 30 September 2014 is as follows:
| ENTITY | ASSETS | LIABILITIES | REVENUE | NET INCOME | % OWNED | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
|---|---|---|---|---|---|---|
| Sport TV | 119,279 | 59,496 | 123,967 | (5,807) | 50.00% | (2,904) |
| Dreamia | 10,743 | 7,215 | 2,083 | (103) | 50.00% | (52) |
| Finstar | 46,070 | 90,749 | 143,896 | 22,436 | 30.00% | 6,731 |
| Mstar | 4,721 | 5,865 | 9,960 | 1,091 | 30.00% | 327 |
| Upstar | 42,861 | 42,684 | 50,149 | 51 | 30.00% | 1 5 |
| Distodo | 283 | 532 | 742 | (455) | 50.00% | (227) |
| Canal 20 TV, S.A. | 66 | 57 | - | - | 50.00% | - |
| ZON II | 50 | - | - | - | 100.00% | - |
| ZON III | 50 | - | - | - | 100.00% | - |
| Big Picture 2 Films | 681 | 683 | 3,874 | (76) | 20.00% | (15) |
| ENTITY | ASSETS | LIABILITIES | REVENUE | NET INCOME | % OWNED | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
|---|---|---|---|---|---|---|
| Sport TV | 130,750 | 74,547 | 82,221 | (3,580) | 50.00% | (1,790) |
| Dreamia | 14,541 | 9,279 | 3,403 | 1,737 | 50.00% | 868 |
| Finstar | 63,841 | 69,228 | 136,894 | 40,598 | 30.00% | 12,179 |
| Mstar | 10,765 | 11,111 | 11,127 | 1,111 | 30.00% | 333 |
| Upstar | 42,143 | 41,893 | 40,503 | 50 | 30.00% | 1 5 |
| Distodo | 72 | 317 | 213 | 4 | 50.00% | 2 |
| Canal 20 TV, S.A. | 55 | 57 | - | - | 50.00% | - |
| East Star | 137 | 1 7 |
- | - | 30.00% | - |
| Big Picture 2 Films | 1,600 | 1,476 | 5,125 | 126 | 20.00% | 25 |
composed as follows:
| 31-12-2013 | 30-09-2014 | |
|---|---|---|
| RESTATED | ||
| Investment fund for cinema and audiovisuals ("FICA") | 19,246 | 18,346 |
| Other | 83 | 77 |
| 19,329 | 18,423 |
The balance stated in this item relates mainly to the Cinema and Audiovisual Investment Fund set up in 2007, in compliance with Article 67 of Decree-Law 227/2006 of 15 November. The fund was
established to invest in cinematographic, audiovisual and multiplatform works, with the aim of increasing and improving the supply and potential value of these productions. NOS subscribed for on obligation to the fund, totalling 17,500 thousand euros, corresponding to the current value of the instalments due.
Based on the last published accounts and the estimates of the recovery of assets (Note 15), it was recorded an impairment loss in the amount of 900 thousand euros during the nine months ended at 30 September 2014.
During the year ended on 31 December 2013 and the nine months ended on 30 September 2014, this item was composed as follows:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| ACQUISITION COST | ||
| Industrial property and other rights | 1,346,936 | 1,405,248 |
| Goodwill | 629,386 | 641,802 |
| Other intangible assets | 11,942 | 15,875 |
| Intangible assets in-progress | 24,011 | 29,741 |
| 2,012,275 | 2,092,666 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | ||
| Industrial property and other rights | 841,751 | 923,049 |
| Other intangible assets | 9,925 | 11,352 |
| 851,676 | 934,401 | |
| 1,160,599 | 1,158,265 |
At 30 September 2014, the item "Industrial property and other rights" includes mainly:
Comunicações and the three mobile telecommunication operators in Portugal; and (iv) 80,251 amount of 8,307 thousand euros corresponding to the valuation of the license in the fair value allocation process resulting from the merger (Note 4);
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Telco | 552,785 | 565,201 |
| Audiovisuals | 76,601 | 76,601 |
| 629,386 | 641,802 |
In 2013 impairment tests were performed based on assessments of the current use value and 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 | NOS | NOS | |||
| SEGMENT | AUDIOVISUALS | CINEMAS | |||
| Discount rate (before taxes) | 9.0% | 9.0% | 9.0% | ||
| Assessment period | 5 years | 5 years | 3 years | ||
| EBITDA* Growth | 5.2% | -3.7% | 1.8% | ||
| Perpetuity growth rate | 2.0% | 2.0% | 2.0% |
* EBITDA = Operational result + Depreciation and amortization
The negative growth rate, in the period of 5 years, used for NOS Audiovisuals is due to the expected fall in prices for the year 2014, with significant impact on EBITDA, not totally offset by the estimated EBITDA growth in the subsequent years.
The number of years specified in the impairment tests depend 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.
does not exist signs of impairment to lead to a revision of the impairment tests performed.
During the year ended on 31 December 2013 and the nine months ended at 30 September 2014, this item was composed as follows:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| ACQUISITION COST | ||
| Land | 1,244 | 1,244 |
| Buildings and other constructions | 289,570 | 297,114 |
| Basic equipment | 2,145,368 | 2,220,013 |
| Transportation equipment | 10,848 | 11,031 |
| Tools and dies | 1,226 | 1,235 |
| Administrative equipment | 289,813 | 304,760 |
| Other tangible assets | 39,886 | 41,305 |
| Tangible assets in-progress | 29,193 | 68,607 |
| 2,807,148 | 2,945,309 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | ||
| Buildings and other constructions | 130,827 | 149,599 |
| Basic equipment | 1,271,571 | 1,376,742 |
| Transportation equipment | 4,228 | 5,008 |
| Tools and dies | 1,204 | 1,210 |
| Administrative equipment | 264,817 | 279,308 |
| Other tangible assets | 37,678 | 39,377 |
| 1,710,325 | 1,851,244 | |
| 1,096,823 | 1,094,066 |
y:
i) Buildings and all the structural component of towers and rooftops where telecommunications million euros; and
ii) The entire network and telecommunications infrastructure (fiber optic network and cabling, network million euros.
the Group under finance lease contracts at 31 December 2013 and 30 September 2014, amounted to 167.3 million euros and 175 million euros, and their net book value as of those dates amounted to 113.4 million euros and 109.4 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 2014, total net value of these costs amounted to 13.1 million euros. The amount capitalised in the nine months ended on 30 September 2014 amounted to 1.7 million euros.
At 31 December 2013 and 30 September 2014, the composition of borrowings was as follows:
| 31-12-2013 RESTATED |
30-09-2014 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| LOANS - NOMINAL VALUE | 184,969 | 813,945 | 277,770 | 703,990 |
| Debenture loan | 157,100 | 340,000 | 272,000 | 275,000 |
| Commercial paper | 20,000 | 375,000 | - | 225,000 |
| Foreign loans | - | 98,945 | - | 203,990 |
| National loans | 3,609 | - | 1,434 | - |
| Bank overdrafts | 4,260 | - | 4,336 | - |
| LOANS - ACCRUALS AND DEFERRALS | 2,484 | (2,406) | (2,991) | 1,160 |
| FINANCIAL LEASES | 25,978 | 116,700 | 28,438 | 106,716 |
| Long Term Contracts | 17,426 | 106,559 | 20,015 | 94,925 |
| Other | 8,552 | 10,141 | 8,423 | 11,791 |
| 213,431 | 928,239 | 303,217 | 811,867 |
During the nine months ended at 30 September 2014, the average cost of debt of the used lines was approximately 4.77% (5.07% in 2013).
The Company has bonds issued via three banks totaling 157.1 million euros maturing in 2014, with half-yearly payments of interest and repayment at par at the end of the contract. In May 2014, the Company paid in advance 100 million of the debenture loan and simultaneously negotiated a new debenture loan with BPI, in the amount of 100 million euros maturing in November 2019.
Additionally, in 30 September 2014, the Company repurchased and repaid in advance 25 million euros, with debt amounting, in the period ended in 30 September 2014, to 32 million euros.
In June 2012, NOS launched a Public Offer for Subscription of Bonds for the general public, called "ZON Multimédia Bonds 2012 and half yearly payment at a fixed rate.
During the year ended 31 December 2013, and following the merger (Note 4), a bond loan of 40 million euros hired by Sonaecom in March 2010 was transferred to NOS. The loan bears interest at variable rates, indexed to Euribor and paid semiannually. This issue was organised and mounted, respectively, by Banco Espírito Santo de Investimento and Caixa - Banco de Investimento.
After the merger a bond loan of 100 million euros hired by Sonaecom in September 2011 was also transferred to NOS. The loan bears interest at variable rates, indexed to Euribor and paid semiannually. This issue was organized and mounted by BNP Paribas, ING Belgium SA/NV and Portigon AG (formerly known as WestLB AG). During the year ended 31 December 2013, Portigon AG transferred its entire stake of 33.3 million euros in bonds to Erste Abwicklungsanstalt ("EAA"), a German state entity. During the nine months ended 30 September 2014, the loan was reimbursed entirely in advance.
On 22 September 2014, NOS issued a new bond loan organized by four financial institutions, amounting to 175 million euros, maturing in September 2020. The loan bears interest at variable rates, indexed to Euribor 6M with a spread of 2.15% and paid semiannually.
The Company has borrowings of 225 million euros, in the form of commercial paper contracted with two banks, corresponding to five programs, earning interest at market rates. Grouped commercial paper programmes with maturities over 1 year totaling 225 million euros are classified as non-current, since the Company has the ability to unilaterally renew the current issues on or before the although it has current maturity, was classified as non-current for purposes of presentation in the statement of financial position. The remaining programmes, given the schedule settlement dates, are classified as current.
An amount of 3,374 thousand euros, corresponding to interest and commissions, was deducted from this amount.
In September 2009, NOS and NOS SA signed a Next Generation Network Project Finance Contract with the European Investment Bank in the amount of 100 million euros. This contract matures in September 2015 and is intended for investments relating to the implementation of the next generation network. An amount of 716 thousand euros was deducted from this amount, corresponding to the benefit associated with the fact that the loan is at a subsidized rate.
Additionally, 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. An amount of 5,294 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 2013 and 30 September 2014, 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 Be Artis 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".
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Until 1 year | 28,123 | 33,806 |
| Between 1 and 5 years | 67,506 | 67,514 |
| Over 5 years | 78,907 | 62,815 |
| 174,536 | 164,135 | |
| Future financial costs | (31,858) | (28,982) |
| PRESENT VALUE OF FINANCE LEASE LIABILITIES | 142,678 | 135,154 |
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Until 1 year | 25,978 | 28,438 |
| Between 1 and 5 years | 50,322 | 51,909 |
| Over 5 years | 66,378 | 54,807 |
| 142,678 | 135,154 |
All bank borrowings (with the exception of ZON Multimédia bonds 2012-2015 and the new EIB loan of 110 milion euros) and finance leases contracted 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:
| 31-12-2013 RESTATED |
30-09-2014 | |||||
|---|---|---|---|---|---|---|
| UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
|
| Debenture loan | 155,052 | 338,928 | - | 271,189 | - | 277,150 |
| Commercial paper | 16,159 | 373,678 | - | (2,291) | 223,917 | - |
| Foreign loans | (220) | 98,932 | - | - | 149,872 | 54,118 |
| Internal loans | 12,202 | - | - | 1,539 | - | - |
| Bank overdrafts | 4,260 | - | - | 4,336 | - | - |
| Others | - | - | - | 6 | 9 3 |
- |
| Financial Leases | 25,978 | 50,322 | 66,378 | 28,438 | 51,909 | 54,807 |
| 213,431 | 861,861 | 66,378 | 303,217 | 425,792 | 386,074 |
At 31 December 2013 and 30 September 2014, this item was composed as follows:
| 31-12-2013 | |||
|---|---|---|---|
| RESTATED | 30-09-2014 | ||
| Suppliers current account | 296,715 | 314,347 | |
| Advances from customers | 108 | 143 | |
| 296,823 | 314,490 |
At 31 December 2013 and 30 September 2014, this item was composed as follows:
| 31-12-2013 | ||
|---|---|---|
| RESTATED | 30-09-2014 | |
| Litigation and other - i) | 16,530 | 52,150 |
| Financial investments - ii) | 13,912 | 1,844 |
| Dismantling and removal of assets - iii) | 14,509 | 15,189 |
| Contingent liabilities - iv) | 66,133 | 36,681 |
| Contingencies - other - v) | 21,887 | 22,288 |
| 132,972 | 128,152 |
i) The amount under the item "Litigation and other" corresponds to provisions to cover the legal and tax claims of which stand out:
that the Board understood to impose a final decision to dismiss the case. However, on 16 January 2014, NOS SA received a settlement notice regarding the fine imposed by the CNPD, against which appealed to the courts. On 8 September 2014, the Court for Competition, Regulation and 600 thousand euros. NOS SA appealed against this decision. As a consequence of this decision, the provision was reduced by 3.9 million euros.
ay the extraordinary contribution. An audit to the amount of revenues eligible is underway and in its closing stages. It is expected that PTC submits to ICP-ANACOM the CLSU calculations incurred in the period from 2012 to June 2014. It is estimated that the contribution of Optimus, SA, up until the date of the merger, amounts to 22 million euros.
It is the opinion of the Board of Directors of NOS that this extraordinary contribution violates the Directive of Universal Service, given that PTC was not designated the universal service provider through a tender procedure. 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, recognized on a legal and constitutional level in Portuguese domestic law. For these reasons, NOS will judicially challenge the liquidation of each and all extraordinary contributions. Following these facts, which took place especially in June 2014, and after reassessing the process with its attorneys, this contribution is classified as a contingent liability. However, 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 2013 and 2014, movements in provisions were as follows:
| 31-12-2012 | INCREASES | DECREASES | OTHER | 30-09-2013 | ||
|---|---|---|---|---|---|---|
| RESTATED | RESTATED | |||||
| Litigation and other | 3,920 | - | (362) | - | 9,938 | |
| Financial investments | 21,540 | - | (5,275) | - | 16,265 | |
| Dismantling and removal of assets | 4,910 | 64 | - | (2,500) | 16,735 | |
| Contingent liabilities | - | - | - | - | 77,215 | |
| Contingencies - other | - | 10,888 | (3,531) | (423) | 21,517 | |
| 30,371 | 10,951 | (9,168) | (2,923) | 141,670 |
| 31-12-2013 | INCREASES 10,578 |
DECREASES | OTHER | 30-09-2014 | |
|---|---|---|---|---|---|
| RESTATED | |||||
| Litigation and other | 16,530 | (5,936) | 30,908 | 52,150 | |
| Financial investments | 13,912 | - | (12,068) | - | 1,844 |
| Dismantling and removal of assets | 14,509 | 514 | - | (50) | 15,189 |
| Contingent liabilities | 66,133 | - | - | (29,873) | 36,681 |
| Contingencies - other | 21,887 | 1,721 | (852) | (498) | 22,288 |
| 132,972 | 12,813 | (18,856) | 487 | 128,152 |
At 30 September 2014, the amount recorded under the heading "Other" in the amount of 487 thousand euros corresponds mainly to the utilization of provisions made for indeminizations to with certainty when will the expense occur, in the amount of 1.4 million euros.
Also during the nine months ended at 30 September 2014, with the submission of the income tax return, an amount of 2.3 million euros related to tax contingencies previously deducted to the deferred tax assets was reclassified to provisions.
Additionally, during the nine months ended at 30 September 2014, there where recorded provisions for litigations which risk assessment has been changed to likely, in the sequence of recent unfavorable amount of 31 million euros.
The net movements for the nine months ended on 30 September 2013 and 2014, reflected in the lows:
| 9M 13 | 9M 14 | |
|---|---|---|
| RESTATED | ||
| Provisions and adjustments (Note 11) | (4,177) | (4,936) |
| Interests - dismantling | 64 | 514 |
| Restructuring costs | 2,830 | 964 |
| Other non-recurrent costs / (gains) | 8,057 | 7,693 |
| Income tax (Note 16) | - | 944 |
| Financial investments (Note 12) | (5,275) | (12,068) |
| Others | 284 | 846 |
| PROVISIONS AND ADJUSTMENTS | 1,783 | (6,043) |
At 31 December 2013 and 30 September 2014 the share capital of NOS was 5,151,613.80 euros, represented by 515,161,380 shares registered book-entry shares, with a nominal value of 1 euro cent per share.
The main shareholders as of 31 December 2013 and 30 September 2014 are:
| 31-12-2013 | 30-09-2014 | |||
|---|---|---|---|---|
| NUMBER OF | % SHARE | NUMBER OF | % SHARE | |
| SHARES | CAPITAL | SHARES | CAPITAL | |
| ZOPT, SGPS, SA (1) | 257,632,005 | 50.01% | 257,632,005 | 50.01% |
| Banco BPI, SA (2) | 23,344,798 | 4.53% | 23,287,499 | 4.52% |
| Joaquim Alves Ferreira de Oliveira (3) | 14,955,684 | 2.90% | 14,955,684 | 2.90% |
| Sonaecom, SGPS, SA (4) | 37,489,324 | 7.28% | 11,012,532 | 2.14% |
| Fundação José Berardo e Metalgest - Sociedade de Gestão, SGPS, SA | 17,999,249 | 3.49% | - | - |
| Espírito Santo Irmãos, SGPS, SA | 15,455,000 | 3.00% | - | - |
| TOTAL | 366,876,060 | 71.22% | 306,887,720 | 59.57% |
(4) SA at 20 February 2014.
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 August 27. 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:
a) To cover part of the losses on the balance of the year that cannot be covered by other reserves;
b) To cover part of the losses carried forward from the previous year that cannot be covered by the net income of the year or by other reserves;
c) To increase the share capital.
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 2014 there were 1,997,552 own shares, representing 0.3878% of the share capital (31 December 2013: 403,382 own shares, representing 0.0783% of the share capital).
Movements in the nine months ended on 30 September 2013 and 2014 were as follows:
| QUANTITY | VALUE | |
|---|---|---|
| BALANCE AS AT 1 JANUARY 2013 | 401,523 | 914 |
| Acquisition of own shares | 420,973 | 1,490 |
| Distribution of own shares | (571,800) | (1,508) |
| BALANCE AS AT 30 SEPTEMBER 2013 | 250,696 | 896 |
| BALANCE AS AT 1 JANUARY 2014 | 403,382 | 2,003 |
| Acquisition of own shares | 5,162,564 | 26,021 |
| Loan of own shares | 950,000 | 4,869 |
| Reimbursement of the loan of own shares | (576,100) | (2,948) |
| Distribution of own shares - share incentive scheme | (2,107,202) | (10,954) |
| Distribution of own shares - share Public Offering | (1,706,761) | (8,915) |
| Distribution of own shares - other remunerations | (128,331) | (660) |
| BALANCE AS AT 30 SEPTEMBER 2014 | 1,997,552 | 9,416 |
During the first semester of 2014, NOS received, reimbursed and paid the totality of the 950,000 own
NOS made a Public Offering in a maximum of 1,750,000 ordinary, registered and nominative shares, Regulation a and processed and therefore the same amount of 1,706,761 shares was acquired by the employees closing price as at 12 May 2013 (5.125 euros), with a discount of 90% over that price (price of 0.5125 euros per share).
The O .
profit must be used to build up the legal reserve until it corresponds to 20% of the share capital. This reserve cannot be distributed except in the event of liquidation of the company, but it may be used to absorb losses after all other reserves have been exhausted, or for incorporation in the share capital.
Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IAS / IFRS. Thus, on 30 September 2014, NOS had reserves which by their nature are considered distributable in the amount of approximately 187 million euros.
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 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 7,644 thousand Dollars (31 December 2013: 7,550 thousand Dollars), the fair value amounts to about 356 thousand euros (31 December 2013: a negative amount of 132 thousand euros) which is stated in assets and liabilities, respectively, as a contra entry in sharehold
At 30 September 2014, NOS had contracted two interest rate swaps totaling 107 million euros (31 December 2013: 257.5 million euros), which maturities expire in 2014 (one swap in the amount of 32.05 million euros) and 2017 (one swap in the amount of 75 million euros). The fair value of interest rate swaps, in the negative amount of 1.8 million euros (31 December 2013: negative amount of 2.7 million euros) is stated in liabilities, with a contra entry for this amount s
| 31-12-2013 | |||||
|---|---|---|---|---|---|
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| Interest rate swaps | 257,500 | - | - | 2,682 | - |
| Exchange rate forward | 5,474 | - | - | 132 | - |
| 262,974 | - | - | 2,814 | - |
| 30-09-2014 | |||||
|---|---|---|---|---|---|
| ASSETS | LIABILITIES | ||||
| NOTIONAL | CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| Interest rate swaps | 107,050 | - | - | 127 | 1,640 |
| Exchange rate forward | 6,075 | 356 | - | - | - |
| 113,125 | 356 | - | 127 | 1,640 |
Movements during the nine months ended on 30 September 2013 and 2014 were as follows:
2013
| 31-12-2012 | RESULT | EQUITY | 30-09-2013 | |
|---|---|---|---|---|
| Fair value interest rate swaps | (6,051) | - | 1,335 | (4,715) |
| Fair value exchange rate forward | (45) | - | (87) | (132) |
| CASH FLOW HEDGE DERIVATIVES |
(6,095) | - | 1,248 | (4,847) |
| Deferred income tax liabilities | - | - | - | - |
| Deferred income tax assets | 1,616 | - | (329) | 1,288 |
| DEFERRED INCOME TAX | 1,616 | - | (329) | 1,288 |
| (4,479) | - | 920 | (3,559) |
| 31-12-2013 | RESULT | EQUITY | 30-09-2014 | ||
|---|---|---|---|---|---|
| Fair value interest rate swaps | (2,682) | - | 915 | (1,767) | |
| Fair value exchange rate forward | (132) | - | 488 | 356 | |
| CASH FLOW HEDGE | |||||
| DERIVATIVES | (2,814) | - | 1,403 | (1,411) | |
| Deferred income tax liabilities | - | - | (87) | (87) | |
| Deferred income tax assets | 693 | - | (27) | 666 | |
| DEFERRED INCOME TAX | 693 | - | (114) | 579 | |
| (2,121) | - | 1,289 | (832) |
At 31 December 2013 and 30 September 2014, the Group had furnished sureties, guarantees and comfort letters in favour of third parties corresponding to the following situations:
| 31-12-2013 | 30-09-2014 | |
|---|---|---|
| RESTATED | ||
| Financial instituitions i) | 100,193 | 210,425 |
| Tax authorities ii) | 31,219 | 24,856 |
| Anacom iii) | 24,000 | - |
| Other iv) | 19,660 | 15,652 |
| 175,072 | 250,932 |
i) At 31 December 2013 and 30 September 2014, this amount relates to guarantees issued by NOS in connection with the loans from EIB (Note 27). The increase relates to the new 110 million EIB loan.
ii) At 31 December 2013 and 30 September 2014, this amount relates to guarantees demanded by the tax authorities in connection with tax proceedings contested by the Company and its subsidiaries (Note 34).
iii) At 31 December 2013, this amount relates to guarantees issued by NOS SA on the acquisition of spectrum for the 4th generation. This guarantee was canceled on 10 January 2014 following the anticipation of the payment related to the acquisition of spectrum for the 4th generation.
iv) At 31 December 2013 and 30 September 2014, this amount mainly relates to guarantees provided in connection with Municipal Wayleave Tax proceedings and guarantees provided to cinema owners, and bank guarantees given to providers of satellite capacity renting services (Note 34).
At 30 September 2014, in connection with the finance obtained by Upstar from BES, totaling 20 million euros, NOS signed a promissory note, proportional to the participation held, of 30% of the loan.
Additionally, during the nine months ended at 30 September 2014, in connection with a contract between Upstar and a supplier of TV contents, NOS signed a personal guarantee, in the form of a tee of a obligations.
In connection with the finance obtained by Finstar from Banco BIC, Banco BNI and BFA, totaling 1,818 million AKZ, 735 million AKZ and 1,179 million AKZ, respectively, NOS signed three comfort letters accepting liability for up to 30% of the total amount of the loan. The comfort letter from the Banco
Caixa Totta also covers 30% of 7.5 million USD of back to back letters of credit for importing goods. financing along with BFA, to the sum of 717 million AKZ.
In addition to the guarantees required by the Tax Authorities were set up sureties for the current fiscal processes. Sonaecom SGPS consisted of NOS SA surety for the amount of 10,529,619 euros and NOS consisted of NOS SA surety for the amount of 1,212,933 euros.
The rentals due on non-cancellable operating leases or operating leases with renewal option have the following maturities:
| 31-12-2013 RESTATED BETWEEN |
30-09-2014 | BETWEEN | ||||||
|---|---|---|---|---|---|---|---|---|
| AUTOMATIC | UNTIL 1 | 1 AND 5 | OVER 5 | AUTOMATIC | UNTIL 1 | 1 AND 5 | OVER 5 | |
| RENEWAL | YEAR | YEARS | YEARS | RENEWAL | YEAR | YEARS | YEARS | |
| Stores, movie theatre and other buildings | 4,453 | 44,380 | 127,850 | 46,080 | 2,268 | 36,653 | 84,526 | 38,016 |
| Telecommunication towers and rooftops | 8,240 | 5,920 | 15,207 | 13,511 | 9,607 | 4,269 | 13,231 | 10,877 |
| Equipment | - | 101 | 249 | 56 | 57 | 38 | 22 | - |
| Vehicles | - | 2,397 | 4,201 | - | - | 1,985 | 3,166 | - |
| 12,693 | 52,799 | 147,507 | 59,647 | 11,932 | 42,945 | 100,944 | 48,893 |
The EIB loan totaling 100 million euros with a maturity of 5 years is intended exclusively to finance the next generation network investment project. This amount may not in any circumstances exceed 50% of the total cost of the project.
The EIB loan totaling 110 million euros with a maturity of 8 years is intended exclusively to finance the nt may not in any circumstances exceed 50% of the total cost of the project.
Of the loans obtained (excluding financial leases), in addition to being subject to the Group complying with its operating, legal and fiscal obligations, 84% are subject to cross-default clauses, 94% to pari passu clauses, 47% to ownership clauses and 74% to negative pledge clauses.
In addition, approximately 43% of the total loans obtained require that the consolidated net financial debt does not exceed 3 times consolidated EBITDA and 8% of the total loans obtained that the consolidated net financial debt does not exceed 4 times consolidated EBITDA.
Following the final decision of the Competition Authority not to oppose the merger between ZON and Optimus SGPS were made the following commitments:
a) To ensure that NOS extends the contract's period of validity for the reciprocal sharing of the NOS SA and Vodafone Portugal ("Vodafone") network;
b) To ensure that NOS modifies the reciprocal sharing contract for the NOS SA and Vodafone network so that the limitation of liability in the event that the resolution is unjustified or justified for a reason attributable to NOS SA, does not apply;
c) To ensure that NOS SA, for a determined period of time, will not charge its fiber optic triple play service clients the payment due because of loyalty clauses in place, in the event of a disconnection request;
d) To ensure that NOS SA will be open to negotiate, for a determined period of time, with a requested third party, a contract which allows wholesale access to its fiber network;
e) To ensure that NOS SA will present to and negotiate with Vodafone, for a determined period of time, a contract that gives the option of buying its fiber network.
Detailed summary of related parties as at 30 September 2014:
| RELATED PARTIES | ||||
|---|---|---|---|---|
| 3DO Holding GmbH | Canal 20 TV | |||
| 8ª Avenida Centro Comercial, SA | Cape Technologies Limited | |||
| ADD Avaliações Engenharia de Avaliações e Perícias Ltda | Carvemagere-Manut.e Energias Renov., Lda | |||
| Adlands B.V. | Casa Agrícola de Ambrães, S.A. | |||
| Aegean Park, S.A. | ||||
| Agepan Eiweiler Management GmbH | ||||
| Agepan Flooring Products, S.A.RL | Cascaishopping Holding I, SGPS, S.A. | |||
| Agloma Investimentos, Sgps, S.A. | CCCB Caldas da Rainha - Centro Comercial,SA | |||
| Águas Furtadas Sociedade Agrícola, SA | ||||
| Centro Residencial da Maia,Urban., S.A. | ||||
| ALBCC Albufeirashopping C.Comercial SA | ||||
| ALEXA Administration GmbH | Change, SGPS, S.A. | |||
| ALEXA Asset GmbH & Co KG | ||||
| ALEXA Holding GmbH | Cinclus Imobiliária, S.A. | |||
| ALEXA Shopping Centre GmbH | Cinveste, SGPS, SA | |||
| Citic Capital Sierra Limited | ||||
| Citic Capital Sierra WFOE | ||||
| Apor - Agência para a Modernização do Porto | ||||
| Colombo Towers Holding, BV | ||||
| Arat inmebles, S.A. | Companhia de Pesca e Comércio de Angola (Cosal), SARL | |||
| ARP Alverca Retail Park,SA | Companhia Térmica do Serrado, ACE | |||
| Companhia Térmica Hectare, ACE | ||||
| Aserraderos de Cuellar, S.A. | Companhia Térmica Tagol, Lda. | |||
| Atelgen-Produção Energia, ACE | Contacto Concessões, SGPS, S.A. | |||
| Continente Hipermercados, S.A. | ||||
| Azulino Imobiliária, S.A. | Contry Club da Maia-Imobiliaria, S.A. | |||
| BA Business Angels, SGPS, SA | Cooper Gay Swett & Crawford Lt | |||
| BA Capital, SGPS, SA | Craiova Mall BV | |||
| Banco BPI, SA | ||||
| BB Food Service, S.A. | CTE-Central Termoeléct. do Estuário, Lda | |||
| Beralands BV | ||||
| Darbo S.A.S | ||||
| BHW Beeskow Holzwerkstoffe | Deutsche Industrieholz GmbH | |||
| Big Picture 2 Films, SA | ||||
| Blackrock, Inc. | Discovery Sports, SA | |||
| Distodo - Distribuição e Logística, Lda. | ||||
| Dortmund Tower GmbH | ||||
| Boavista Shopping Centre BV | ||||
| Caixa Geral de Depósitos, SA | Dreamia - Serviços de Televisão, S.A. | |||
| Dreamia Holding B.V. |
| RELATED PARTIES | |
|---|---|
| East Star Ltd | |
| Ecociclo II | |
| Efanor Investimentos, SGPS, S.A. | |
| Efanor Serviços de Apoio à Gestão, S.A. | Imoplamac Gestão de Imóveis, S.A. |
| El Rosal Shopping, S.A. | |
| Emfísico Boavista | |
| Empreend.Imob.Quinta da Azenha, S.A. | |
| Enerlousado-Recursos Energéticos, Lda. | |
| Equador & Mendes, Lda | |
| Imosonae II | |
| Impaper Europe GmbH & Co. KG | |
| Estêvão Neves - SGPS, SA | |
| Farmácia Selecção, S.A. | Infosystems-Sociedade de Sistemas de Informação,S.A. |
| Fashion Division Canárias, SL | Infratroia, EM |
| Fashion Division, S.A. | |
| Feneralt-Produção de Enercia, ACE | Inparvi SGPS, S.A. |
| Filmes Mundáfrica, SARL | Integrum - Energia, SA |
| FINSTAR - Sociedade de Investimentos e Participações, SA | Integrum ACE, SA |
| Integrum Colombo Energia, S.A. | |
| Integrum Engenho Novo - Energia, S.A. | |
| Frieengineering International Ltda | INTEGRUM II - ENERGIA, S.A. |
| Fundação José Berardo | INTEGRUM III - ENERGIA, S.A. |
| Fundo de Invest. Imobiliário Imosede | Integrum Martim Longo - Energia, S.A. |
| Fundo I.I. Parque Dom Pedro Shop.Center | |
| Fundo Invest.Imob.Shopp. Parque D.Pedro | Invesaude - Gestão Hospitalar S.A. |
| Fundo Investimento para Cinema e Audiovisual | Ioannina Development of Shopping Centres, SA |
| Isoroy SAS | |
| ITRUST - Cyber Security and Intellig.,SA | |
| Gesgráfica - Projectos Gráficos, Lda | Joaquim Alves Ferreira de Oliveira |
| GHP Gmbh | Kento Holding Limited |
| Gli Orsi Shopping Centre 1 Srl | |
| Glunz AG | Laminate Park GmbH Co. KG |
| Glunz Service GmbH | Land Retail B.V. |
| Glunz UK Holdings Ltd | Larim Corretora de Resseguros Ltda |
| Glunz Uka Gmbh | Larissa Develop. Of Shopping Centers, S.A. |
| GMET, ACE | |
| LCC LeiriaShopping Centro Comercial SA | |
| Grupo Visabeira, SGPS, SA | Le Terrazze - Shopping Centre 1 Srl |
| Libra Serviços, Lda. | |
| Harvey Dos Iberica, S.L. | |
| Herco Consultoria de Riscos e Corretora de Seguros Ltda | Lookwise, S.L. |
| HighDome PCC Limited | Loop5 Shopping Centre GmbH |
| Iberian Assets, S.A. | |
| Lusitânia - Companhia de Seguros, SA | |
| Lusitânia Vida - Companhia de Seguros, SA | |
| Luz del Tajo B.V. | |
| RELATED PARTIES | |
|---|---|
| Pátio Penha Shopping Ltda. | |
| Marcas MC, ZRT | Pátio São Bernardo Shopping Ltda |
| Marina de Tróia S.A. | Pátio Sertório Shopping Ltda |
| Pátio Uberlândia Shopping Ltda | |
| PCJ - Público, Comunicação e Jornalismo, S.A. | |
| MDS Affinity - Sociedade de Mediação, Lda | |
| MDS Africa SGPS, S.A. | Plaza Éboli B.V. |
| MDS Consultores, S.A. | |
| MDS Corretor de Seguros, S.A. | Plaza Mayor Holding, SGPS, SA |
| MDS Malta Holding Limited | Plaza Mayor Parque de Ócio BV |
| MDS SGPS, SA | Plaza Mayor Parque de Ocio, SA |
| MDSAUTO - Mediação de Seguros, SA | Plaza Mayor Shopping BV |
| Megantic BV | Plaza Mayor Shopping, SA |
| Metalgest - Sociedade de Gestão, SGPS, SA | Ploi Mall BV |
| Plysorol, BV | |
| Mlearning - Mds Knowledge Centre, Unip, Lda | Poliface North America |
| PORTCC - Portimãoshopping Centro Comercial, SA | |
| Powercer-Soc.de Cogeração da Vialonga,SA | |
| Modelo Continente Hipermercados, S.A. | |
| Modelo Continente Intenational Trade, SA | |
| Modelo Hiper Imobiliária, S.A. | Praedium SGPS, S.A. |
| Praesidium Services Limited | |
| Predilugar - Sociedade Imobiliária, SA | |
| Mstar, SA | Prédios Privados Imobiliária, S.A. |
| Munster Arkaden, BV | Pridelease Investments, Ltd |
| Norges Bank | |
| Norteshopping Retail and Leisure Centre, BV | |
| Nova Equador Internacional,Ag.Viag.T, Ld | |
| Nova Equador P.C.O. e Eventos | Project SC 1 BV |
| Ongoing Strategy Investments, SGPS, SA | Project SC 2 BV |
| Project Sierra 2 B.V. | |
| OSB Deustchland Gmbh | Project Sierra 7 BV |
| PantheonPlaza BV | Project Sierra 8 BV |
| Project Sierra 9 BV | |
| Pareuro, BV | Project Sierra Brazil 1 B.V. |
| Park Avenue Develop. of Shop. Centers S.A. | Project Sierra Charagionis 1 S.A. |
| Project Sierra Four, SA | |
| Parque D. Pedro 1 B.V. | Project Sierra Germany Shop. Center 1 BV |
| Parque D. Pedro 2 B.V. | Project Sierra Germany Shop. Center 2 BV |
| Project Sierra Spain 1 B.V. | |
| Parque Principado SL | |
| Pátio Boavista Shopping Ltda. | |
| Pátio Campinas Shopping Ltda | Project Sierra Spain 3 B.V. |
| Pátio Goiânia Shopping Ltda | Project Sierra Spain 6 B.V. |
| Pátio Londrina Empreend. e Particip. Ltda | Project Sierra Spain 7 B.V. |
| RELATED PARTIES | |
|---|---|
| Project Sierra Three Srl | SIAL Participações Ltda |
| Project Sierra Two Srl | Sierra Asia Limited |
| Promessa Sociedade Imobiliária, S.A. | |
| Sierra Berlin Holding BV | |
| Sierra Central S.A.S | |
| Sierra Charagionis Develop.Sh. Centre S.A. | |
| Racionaliz. y Manufact.Florestales, S.A. | Sierra Charagionis Propert.Management S.A. |
| RASO - Viagens e Turismo, S.A. | Sierra Corporate Services Holland, BV |
| RASO II-Viagens e Turismo,Unipessoal Lda | Sierra Development Greece, S.A. |
| RASO, SGPS, S.A. | Sierra Developments Germany GmbH |
| Sierra Developments Holding B.V. | |
| River Plaza Mall, Srl | Sierra Developments Italy S.r.l. |
| River Plaza, BV | Sierra Developments Romania, Srl |
| Rochester Real Estate, Limited | |
| Ronfegen-Recursos Energéticos, Lda. | Sierra Developments, SGPS, S.A. |
| RSI Corretora de Seguros Ltda | Sierra Enplanta Ltda |
| S.C. Microcom Doi Srl | Sierra European R.R.E. Assets Hold. B.V. |
| S21 Sec Barcelona, S.L. | Sierra GP Limited |
| S21 Sec Brasil, Ltda | Sierra Investimentos Brasil Ltda |
| S21 Sec Ciber Seguridad, S.A. de CV | Sierra Investments (Holland) 1 B.V. |
| S21 Sec Fraud Risk Management, S.L. | Sierra Investments (Holland) 2 B.V. |
| S21 SEC Gestion, S.A. | Sierra Investments Holding B.V. |
| S21 Sec Inc. | Sierra Investments SGPS, S.A. |
| S21 Sec Information Security Labs, S.L. | Sierra Management Germany GmbH |
| S21 Sec Institute, S.L. | Sierra Management Italy S.r.l. |
| S21 Sec México, S.A. de CV | Sierra Management Romania, Srl |
| S21 Sec, S.A. de CV | |
| Sierra Management, SGPS, S.A. | |
| Saphety Brasil Transações Eletrônicas Ltda. | Sierra Portugal, S.A. |
| SISTAVAC, S.A. | |
| SC Aegean B.V. | SKK SRL |
| SC Assets SGPS, S.A. | |
| SC Finance BV | Sociedade de Construções do Chile, S.A. |
| SC Mediterraneum Cosmos B.V. | Société de Tranchage Isoroy S.A.S. |
| SC, SGPS, SA | |
| SCS Beheer, BV | |
| SDSR - Sports Division 2, S.A. | Soconstrução BV |
| Selfrio,SGPS, S.A. | Sodesa, S.A. |
| Soflorin, BV | |
| Solinca - Eventos e Catering, SA | |
| Solinca - Health and Fitness, SA | |
| Servicios de Int.Estratégica Global,S.L. | |
| Solingen Shopping Center GmbH | |
| SGC, SGPS, SA | Somit Imobiliária |
| Shopping Centre Parque Principado B.V. | SONAE - Specialized Retail, SGPS, SA |
| Sonae Capital Brasil, Lda | |
| RELATED PARTIES | |
|---|---|
| Sonae Capital,SGPS, S.A. | Tecmasa Reciclados de Andalucia, SL |
| Sonae Center II S.A. | Tecnológica Telecomunicações LTDA. |
| Sonae Center Serviços, S.A. | Telefónica, SA |
| Têxtil do Marco, S.A. | |
| Sonae Financial Services, S.A. | TLANTIC B.V. |
| Sonae Ind., Prod. e Com.Deriv.Madeira, S.A. | |
| Tlantic Sistemas de Informação Ltdª | |
| Sonae Industria de Revestimentos, S.A. | Tool Gmbh |
| Sonae Indústria Manag. Serv, SA | Torre Ocidente Imobiliária, S.A. |
| Sonae Investimentos, SGPS, SA | |
| Sonae Novobord (PTY) Ltd | |
| Sonae RE, S.A. | Troia Market, S.A. |
| Tróia Natura, S.A. | |
| Sonae SGPS, S.A. | |
| Sonae Sierra Brasil S.A. | |
| Sonae Sierra Brazil B.V. | |
| Sonae Sierra, SGPS, S.A. | Turismo da Samba (Tusal), SARL |
| Sonae SR Malta Holding Limited | |
| Sonae Tafibra Benelux, BV | Unishopping Administradora Ltda. |
| Unishopping Consultoria Imob. Ltda. | |
| Sonae UK, Ltd. | Unitel International Holdings, B.V. |
| Sonaecom - Serviços Partilhados, S.A. | Unitel STP |
| Unitel T+ | |
| Sonaecom BV | Upstar Comunicações SA |
| Sonaecom, SGPS, S.A. | |
| SONAECOM-CYBER SECURITY AND INT.,SGPS,SA | Valecenter Srl |
| Valor N, S.A. | |
| SONAEMC - Modelo Continente, SGPS, S.A. | |
| Sonaetelecom BV | |
| Sondis Imobiliária, S.A. | |
| Sontel BV | Viajens y Turismo de Geotur España, S.L. |
| Sontur BV | Vistas do Freixo, SA |
| Sonvecap BV | Vuelta Omega, S.L. |
| Sopair, S.A. | We Do Technologies Panamá S.A. |
| We Do Technologies Singapore PTE. LTD. | |
| Soternix-Produção de Energia, ACE | |
| Spanboard Products, Ltd | |
| WeDo Poland Sp. Z.o.o. | |
| Spinarq - Engenharia, Energia e Ambiente, SA | WeDo Technologies (UK) Limited |
| WeDo Technologies Americas, Inc. | |
| WeDo Technologies Australia PTY Limited | |
| WeDo Technologies BV | |
| Sport TV Portugal, S.A. | |
| WeDo Technologies Egypt LLC | |
| WeDo Technologies Mexico, S de R.L. | |
| Sport Zone Canárias, SL | Weiterstadt Shopping BV |
| Sport Zone España-Com.Art.de Deporte,SA | |
| Spred, SGPS, SA | Worten Canárias, SL |
| SSI Angola, S.A. | Worten España, S.A. |
| Stinnes Holz GmbH | ZAP Cinemas, S.A. |
| Tableros Tradema, S.L. | ZAP Media, S.A. |
| Tafiber,Tableros de Fibras Ibéricas, SL | ZAP Publishing, S.A. |
| Tafibra Polska Sp.z.o.o. | Zenata Commercial Project S.A. |
| Tafibra South Africa | ZIPPY - Comércio e Distribuição, SA |
| Tafibra Suisse, SA | ZIPPY - Comercio y Distribución, S.A. |
| Zippy Turquia | |
| Tafisa Canadá Societé en Commandite | ZON II - Serviços de Televisão SA |
| Tafisa France, S.A. | ZOPT, SGPS, S.A. |
| Tafisa UK, Ltd | Zubiarte Inversiones Inmobiliarias, S.A. |
| Taiber,Tableros Aglomerados Ibéricos, SL | ZYEVOLUTION-Invest.Desenv.,SA. |
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 2013 and 30 September 2014 and transactions in the nine months ended 30 September 2013 and 2014 between NOS Group and its associated companies, joint ventures and other related parties are as follows:
| SALES AND SERVICES RENDERED |
SUPPLIES AND EXTERNAL SERVICES |
INTEREST INCOME (EXPENSE) |
OTHER OPERATING REVENUES |
|
|---|---|---|---|---|
| SHAREHOLDERS | ||||
| Banco BPI | 1 | - | (4,970) | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
||||
| Big Picture 2 Films | 1 5 |
2,086 | - | 1 |
| Distodo | - | 460 | - | 2 |
| Dreamia Holding BV | 252 | - | 156 | - |
| Dreamia SA | 2,298 | 78 | - | 547 |
| Finstar | 511 | - | - | - |
| Fundo Investimento para Cinema e Audiovisual | - | - | - | - |
| Sport TV | 198 | 42,709 | - | - |
| Upstar | 5,012 | - | 946 | 546 |
| OTHER RELATED PARTIES | ||||
| Banco Espirito Santo | - | 20 | (6,629) | - |
| Mainroad | 39 | 194 | - | 1 7 |
| Sonaecom | 5 | 88 | (1,468) | 71 |
| WeDo | 239 | 359 | - | 63 |
| Outras | 88 | 141 | - | 57 |
| 8,657 | 46,134 | (11,964) | 1,303 |
| ACCOUNT RECEIVABLE TRADE |
ACCOUNT RECEIVABLE OTHER |
ACCOUNT PAYABLE TRADE |
ACCOUNT PAYABLE OTHER |
ACCRUALS AND DEFERRALS ASSETS |
ACCRUALS AND DEFERRALS LIABILITIES |
|
|---|---|---|---|---|---|---|
| SHAREHOLDERS Sonaecom |
(6) | 5,715 | 3,640 | - | 1,946 | 8,756 |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
||||||
| Big Picture 2 Films | - | - | 222 | - | - | 111 |
| Canal 20 TV | - | - | 1 | - | - | - |
| Distodo | 2 | 46 | 105 | - | - | - |
| Dreamia Holding BV | 195 | 2,366 | - | - | - | - |
| Dreamia SA | 3,596 | 4,266 | 4,205 | - | - | 201 |
| Finstar | 6,387 | 693 | - | - | - | - |
| Fundo Investimento para Cinema e Audiovisual | - | - | - | 17,500 | - | - |
| Mstar | 1 | 1 | - | - | - | - |
| Sport TV | 612 | 45 | 21,202 | - | - | 3,363 |
| Upstar | 2,657 | 2,226 | 214 | - | - | - |
| OTHER RELATED PARTIES | ||||||
| Mainroad | 802 | 6 | 938 | - | 32 | - |
| Modelo Continente Hipermercados | 601 | 3 | 1 6 |
1 | 299 | 405 |
| Sierra Portugal | 171 | 9 | 221 | 2 | 1,469 | - |
| We Do Consulting | 115 | - | 952 | - | 295 | 56 |
| Worten | 4,234 | 53 | 362 | - | 89 | 969 |
| Other related parties | 805 | 1 4 |
578 | 9 | 794 | 63 |
| 20,172 | 15,443 | 32,656 | 17,512 | 4,924 | 13,924 |
| BORROWINGS | FINANCIAL APPLICATIONS |
DERIVATIVES ASSETS |
DERIVATIVES LIABILITIES |
FINANCIAL LEASES |
|
|---|---|---|---|---|---|
| Banco BPI | 96,447 | - | - | 384 | - |
| Banco Espírito Santo | 146,659 | 41,933 | - | 131 | 1,142 |
| 243,106 | 41,933 | - | 515 | 1,142 |
| SALES AND SERVICES |
SUPPLIES AND EXTERNAL |
INTEREST INCOME | OTHER OPERATING |
|
|---|---|---|---|---|
| RENDERED | SERVICES | (EXPENSE) | REVENUES | |
| SHAREHOLDERS | ||||
| Banco BPI | - | 1 2 |
(4,435) | - |
| Sonaecom | 39 | 58 | - | (17) |
| JOINTLY CONTROLLED COMPANIES AND | ||||
| ASSOCIATED COMPANIES | ||||
| Big Picture 2 Films | 9 | 3,244 | - | - |
| Distodo | - | 9 7 |
- | 1 |
| Dreamia Holding BV | 224 | - | 155 | - |
| Dreamia SA | 2,682 | 31 | - | 407 |
| Finstar | 496 | - | - | - |
| Mstar | 8 | - | - | - |
| Sport TV | 140 | 34,562 | - | 2 |
| Upstar | 5,624 | (361) | 119 | 222 |
| ZAP Media | 296 | - | - | - |
| OTHER RELATED PARTIES | ||||
| Continente Hipermercados | 221 | 35 | - | - |
| Digitmarket | 28 | 719 | - | (0) |
| Mainroad | 237 | 2,128 | - | 515 |
| MDS-Corrector Seguros | 155 | 60 | - | - |
| Modalfa | 173 | - | - | - |
| Modelo | 155 | - | - | - |
| Modelo Continente Hipermercados | 3,111 | (149) | - | 81 |
| Pharmacontinente | 132 | - | - | - |
| Raso - Viagens e Turismo | 9 5 |
1,400 | - | 1 |
| Saphety Level | 66 | 433 | - | (0) |
| Sierra Portugal | 1,014 | 792 | - | - |
| Sistavac | 153 | 67 | - | - |
| Sonae Center Serviços II | 793 | 35 | - | - |
| Sonae Indústria PCDM | 269 | - | - | - |
| SPINVESTE-Promoção Imobiliária | - | 200 | - | - |
| Sports Division SR | 299 | - | - | - |
| We Do Consulting | 278 | 3,279 | - | - |
| Worten | 5,139 | 1,638 | - | - |
| Other related parties | 1,144 | 233 | - | 24 |
| 22,981 | 48,514 | (4,161) | 1,235 |
Balances at 30 September 2014
| ACCOUNT RECEIVABLE TRADE |
ACCOUNT RECEIVABLE OTHER |
ACCOUNT PAYABLE TRADE |
ACCOUNT PAYABLE OTHER |
ACCRUALS AND DEFERRALS ASSETS |
ACCRUALS AND DEFERRALS LIABILITIES |
|
|---|---|---|---|---|---|---|
| SHAREHOLDERS | ||||||
| Sonaecom | 47 | 28 | 53 | - | 456 | 1 9 |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
||||||
| Big Picture 2 Films | 1 | - | 237 | - | 1 | 370 |
| Distodo | 3 | - | - | - | - | - |
| Dreamia Holding BV | 280 | 2,713 | - | 151 | 9 9 |
- |
| Dreamia SA | 1,364 | 1,402 | 809 | - | 46 | 128 |
| Finstar | 4,579 | 2,007 | - | - | - | 165 |
| Mstar | - | (67) | - | - | - | - |
| Fundo Investimento para Cinema e Audiovisual | - | - | - | 17,500 | - | - |
| Sport TV | 811 | 1 8 |
19,335 | - | 1 0 |
2,971 |
| Teliz | - | - | - | - | - | - |
| Upstar | 4,947 | 172 | 214 | - | 768 | - |
| ZAP Media | 311 | - | - | - | - | - |
| OTHER RELATED PARTIES | ||||||
| Cascaishopping | 2 | 2 | 4 | - | 126 | - |
| Digitmarket | 22 | - | 268 | 159 | 240 | (1) |
| Modelo Continente Hipermercados | 880 | 2 | 1,122 | 1 1 |
468 | 117 |
| Raso - Viagens e Turismo | 71 | - | 176 | - | 58 | 137 |
| Saphety | 44 | 1 | 122 | 26 | 39 | 22 |
| Sierra Portugal | 384 | 278 | 223 | 48 | 1,580 | 1 4 |
| Sonaecenter II | 190 | 6 | 615 | - | 9 0 |
- |
| Sonae Indústria PCDM | 209 | - | - | - | 24 | - |
| We Do Consulting | 191 | - | 527 | 103 | 181 | 1 9 |
| Worten | 3,188 | 48 | (575) | 451 | 9 5 |
691 |
| Other related parties | 707 | 62 | 373 | 133 | 348 | (174) |
| 18,229 | 6,672 | 23,503 | 18,582 | 4,631 | 4,480 | |
| BORROWINGS | FINANCIAL APPLICATIONS |
DERIVATIVES ASSETS |
DERIVATIVES LIABILITIES |
FINANCIAL LEASES |
||
| Banco BPI | 99,997 | - | - | - | - | |
| 99,997 | - | - | - | - |
Additionally, during the nine months ended on 30 September 2014, NOS received, reimbursed and paid the whole of the 950,000 own shares loaned by Sonaecom, SGPS, SA (Note 30.3).
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.
In February 2004, pursuant to Article 13 of the Authorisation Directive (Directive 2002/20/EC of 7 June), Law 5/2004 of 10 February (Electronic Communications Law) established in its Article 106 the and crossing, in a determined area, of the public and private municipal domain" by the systems, equipment and other resources of companies offering public electronic communications networks and services.
communications networks and services at a fixed location to all end customers within the respective municipality", and is calculated as a maximum percentage of 0.25% of the amount of each invoice. Some municipalities, despite approving the TMDP, have continued to collect Occupancy Taxes, while others have opted to maintain the latter taxes rather than approving the TMDP.
In the light of legal advice on the matter, the Group believes that the TMDP is the only tax that should be collected as consideration for the above mentioned rights, namely the right of installation, for which reason it has challenged the public highway Occupancy Taxes charged to it by municipalities, since it deems such taxes illegal. It must also be highlighted that under the scope of an administrative complaint, a decision has been made by some municipalities, which have either subscribed to the Group's interpretation or decided that they may only opt for one rate or the other, as it is not possible for the TMDP and public road Occupancy Rates to overlap.
Meanwhile, various judicial judgments have been issued on the substantive issue, including by the Supreme Administrative Court that uphold the position and understanding of NOS SA, with the result that there are good prospects that this dispute will be definitively resolved in favour of NOS SA by the majority of municipalities. Two appeals have been entered on the constitutional court related to two proceedings of Lisbon City Hall, which have not been decided.
With the entry into force of Decree-Law 123/2009, this matter has been definitively resolved for the futur TMDP is payable for the use and usufruct of property in the public or private municipal domain which involves the construction or installation, by companies that offer public electronic communications networks and services, of infrastructures for housing electronic communications in accordance with the terms of the Electronic Communications Law, and that no other taxes, official fees or consideration are due.
NOS SA, NOS Açores and NOS Madeira brought actions for judicial review of ICPdecisions in respect of the payment of the Annual Fee (for 2009, 2010, 2011, 2012 and 2013) 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 and 7,270 thousand euros; (ii) 29 thousand euros, 60 thousand euros, 95 thousand euros, 95 thousand euros and 104 thousand euros; (iii) 40 thousand euros, 83 thousand euros, 130 thousand euros, 132 thousand euros and 149 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%) 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 2009, for which the appeal was upheld, with no prior hearing, condemning ICP-ANACOM to pay the costs. ICP-ANACOM appealed and by decision of July 2013 was not upheld.
The remaining proceedings are awaiting trial and decision.
NOS tendered in an auction for licences for a nationwide freeview generalist programme service, to be broadcast via terrestrial television. The Regulator of Social Communication idder. NOS has applied for judicial review of the decision. Meanwhile, in 2014, NOS gave up for the appeal and ended the action.
During the course of the 2003 to 2013 financial years, some companies of the NOS Group were the subject of tax inspections for the 2001 to 2011 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 is about 25.8 million euros. 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 32.
At end of year 2013 and taking advantage of the extraordinary settlement scheme of tax debts, the Group settled 7.7 million euros (corresponding to notifications in the amount of 17.3 million euros less accrued interests). This amount was recorded as "taxes receivable" non current net of the provision recorded in the amount of 3.5 million euros (Note 22).
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.
PT brought an action in Funchal Judicial Court against NOS Madeira, claiming payment of 1,608 thousand euros, plus accrued interest until the date of full settlement, for the alleged use of ducts, supply of the MID service, supply of video and audio channels, operating, maintenance and management costs of the Madeira/Porto Santo undersea cable and the use of two fiber optic circuits.
The company contested the action, in particular the prices concerned, the services and PT's legal capacity in respect of the ducts.
At the end of July 2013, a favorable decision was given to NOS Madeira, which, however, PT appealed. The case is pending normal development.
In April 2012, following the decision made on 19 July 2011 in which NOS Açores was acquitted, PT brought two new actions against NOS Açores, one relating to the MID service and the other to the supply of video and audio channels, claiming payment of 222 thousand euros and 316 thousand euros respectively, plus interest. They are awaiting decision. A sentence, without impacting interests, reduced the amount payable by NOS Açores to about 97 thousand euros concerning the first action. In what concerns the second action, in the third quarter of 2014, NOS Açores was sentenced to pay 316 thousand euros, plus interest and legal costs. Both these values are fully provisioned at 30 September 2014.
payment of about 1,243 thousand euros, by the alleged early termination of contract and for compensation. It is belief of the Board 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. This action awaits for trial.
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 decided to appeal against the same to the competent judicial authorities. Meanwhile, the Court of Competition, Regulation and Supervision altered the value to 2,700 thousand euros.
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. At September 2014, damages charged but not received by NOS SA, NOS Madeira and NOS Açores amount to a total of 108,842 thousand euros. In the nine months ended 30 September 2014 were received and recorded in the income statement 5,080 thousand euros.
At 30 September 2014, 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 concluding that the interconnection prices for 2001 were not defined. The settlement of outstanding amounts will depend on the price that will be established.
The Share Incentive Schemes approved by the General Meetings of Shareholders on 27 April 2008 and 19 April 2010 with the aim of promoting employee loyalty, aligning their in objectives and creating more favorable conditions for the recruitment of staff of high strategic value, have been implemented in accordance with the principles agreed at those meetings.
These incentive plans comprise a Standard Plan and a Senior Executive 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. The Senior Executive Plan is aimed at eligible members classed as Senior Executives, also selected by the responsible bodies. The Senior Executive Plan, implemented following approval by the General Meeting of Shareholders in April 2010, has a vesting period of 3 years following the attribution of the shares.
The maximum number of shares assigned each year to these plans is approved by the Board of Directors and depends exclusively on fulfillment of the performance objectives established for NOS
The Optimus Group companies had implemented since 2000, a share incentive scheme for more senior employees based on Sonaecom shares, subsequently converted, during 2013 year, into NOS shares. 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 2014, the unvested plans are:
| NUMBER OF | |
|---|---|
| SHARES | |
| SENIOR PLAN | |
| Plan - 2012 | 154,894 |
| Plan - 2013 | 166,283 |
| STANDARD PLAN | |
| Plan - 2009 | 570 |
| Plan - 2010 | 59,613 |
| Plan - 2011 | 133,999 |
| Plan - 2012 | 195,093 |
| Plan - 2013 | 261,777 |
| OPTIMUS PLAN | |
| Plan - 2011 | 4,435 |
| Plan - 2012 | 1,550,966 |
| Plan - 2013 | 1,199,610 |
During the nine months ended 30 September 2014, the movements that occurred in the plans, are detailed as follows:
| SENIOR | STANDARD | OPTIMUS | |
|---|---|---|---|
| PLAN | PLAN | PLAN | |
| BALANCE AS AT 31 DECEMBER 2013 | 583,000 | 921,859 | 4,041,865 |
| MOVEMENTS IN THE PERIOD: | |||
| Vested | (185,835) | (311,740) | (1,609,627) |
| Cancelled / elapsed / corrected (1) | (75,988) | 40,933 | 322,773 |
| BALANCE AS AT 30 SEPTEMBER 2014 | 321,177 | 651,052 | 2,755,011 |
(1) Refers mainly to adjustments made related to dividends paid, exit of employees not entitled to the vesting of shares and adjustments resulting from the way the shares are vested, which are made through the purchase of shares with a discount.
The share plans costs are recognised over the year between the award and vesting date of those shares. The responsibility is calculated taking into consideration the share price at award date of each plan, however for the Optimus plans, the award date is the date of the merger (the time of conversion of Sonaecom shares plans into NOS shares plans). As at 30 September 2014, the outstanding responsability related to these plans is 10,885 thousand euros and is recorded in reserves.
The costs recognised in previous years and in the nine months ended at 30 September 2014, were as follows:
| TOTAL | |
|---|---|
| Costs recognised in previous years related to plans as at 31 December 2013 | 14,297 |
| Costs of plans vested in the nine months | (8,579) |
| Costs recognised in the nine months and others | 5,167 |
| TOTAL COST OF THE PLANS (REGISTERED IN RESERVES) | 10,885 |
* Includes an estimate of the plans to be awarded for the year 2014.
In 1 October 2014, Zon Cinemas, SGPS, SA was dissolved with immediate sharing of its assets. The dissolution will not result in any impacts on the consolidated financial statements.
Untill the approval of this document, no other significant subsequent events occurred that should be disclosed in this report.
| SHARE | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | HEAD OFFICE | ACTIVITY | EFFECTIVE 31-12-2013 |
DIRECT 30-09-2014 |
EFFECTIVE 30-09-2014 |
|
| NOS, SGPS, S.A. | Lisbon | Management of investments | ||||
| de Redes de Comunicações, S.A. ('Artis') | Maia | 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% |
| Maia | Implementation, installation and exploitation of towers and other sites for the instalment of telecommunications equipment |
NOS | 100% | 100% | 100% | |
| 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 España, SL | Madrid | Management of investments relating to activities in Spain in the audiovisuals business |
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% | |
| Maia | Rendering of consulting services in the area of information systems |
NOS SA | - | 100% | 100% | |
| NOS Açores Comunicações, S.A. (b) | Luxembourg 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 | Luxemburgo Implementation, operation, exploitation and offer of networks and rendering services of electronic comunications and related resources; offer and commercialisation of products and equipments of electronic communications | NOS | - | 100% | 100% | |
| NOS Comunicações, S.A. (c) | Lisbon | Implementation, operation, exploitation and offer of networks and rendering services of electronic comunications and related resources; offer and commercialisation of products and equipments of electronic communications |
NOS | 100% | 100% | 100% |
| NOS 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. | Lisboa | Movies distribution, editing, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
100% | 100% | 100% |
| NOS Madeira Comunicações, S.A. | Lisbon | 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. | Lisboa | Comercialization of cable tv contents | NOS SA | 100% | 100% | 100% |
| ('Per-Mar') | Maia | Purchase, sale, renting and operation of property and commercial establishments |
NOS | 100% | 100% | 100% |
| Sontária - Empreendimentos Imobiliários, S.A. ('Sontária') |
Maia | 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. | Lisbon | Management of group financing activities | NOS | 100% | 100% | 100% |
| ZON Audiovisuais, SGPS S.A. (d) | Lisbon | Management of investments | NOS Audiovisuais |
100% | - - | |
| ZON Cinemas, SGPS S.A. | Amsterdam Management of investments | NOS Cinemas | 100% | - - | ||
| ZON FINANCE B.V. | Lisbon | Management of group financing activities | NOS SA / NOS |
100% | 50% / 50% | 100% |
| ZON Televisão por Cabo, SGPS, S.A. (e) | Lisbon | Management of investments | NOS SA | 100% | 100% | 100% |
| ZON TV Cabo Portugal, S.A. (c) | Distribution of television by cable and satellite and operation of telecommunications services |
NOS | 100% | - | - |
a) Company established in 15 May 2014
b) Company acquired in 30 September 2014.
c) During 2014, the Company completed a merger operation by incorporation of ZON TV Cabo Portugal, S.A. in Optimus Comunicações, S.A., thereafter named NOS Comunicações, S.A..
d) Company merged in NOS Lusomundo Audiovisuais, S.A. in September 2014.
e) Company merged in NOS SA in September 2014.
| PERCENTAGE OF OWNERSHIP | ||||||
|---|---|---|---|---|---|---|
| COMPANY | HEAD | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE |
| OFFICE | HOLDER | 31-12-2013 | 30-09-2014 | 30-09-2014 | ||
| Distodo - Distribuição e Logística, Lda. ("Distodo") |
Lisbon | Stocking, sale and distribution of audiovisuals material | NOS Audiovisuais |
50.00% | 50.00% | 50.00% |
| Canal 20 TV, S.A. | Madrid | Production, distribution and sale of contents rights for television films |
NOS | 50.00% | 50.00% | 50.00% |
| ZON II - Serviços de Televisão S.A. (a) | Lisbon | Conception, production, realization and commercialization of audiovisual contents and provision of publicity services |
NOS | 100.00% | - | - |
| Big Picture 2 Films, S.A. | Oeiras | Import, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
20.00% | 20.00% | 20.00% |
| ZON III - Comunicações electrónicas S.A. (b) |
Lisbon | Network operator and provider of eletronic communication services |
NOS | 100.00% | - | - |
a) Company with no activity
b) Company dissolved during the six months ended at 30 June 2014
| HEAD OFFICE | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE | |
| HOLDER | 31-12-2013 | 30-09-2014 | 30-09-2014 | |||
| 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% |
| 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% | 50.00% | 50.00% |
| Upstar Comunicações S.A. | Vendas Novas | Electronic communications services provider, production, commercialization, broadcasting and distribution of audiovisual contents |
NOS | 30.00% | 30.00% | 30.00% |
| ZAP Media S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
FINSTAR | 30.00% | 100.00% | 30.00% |
| ZAP Cinemas, S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
FINSTAR | - | 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.
| ACTIVITY | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| COMPANY | HEAD | SHARE | EFFECTIVE | DIRECT | EFFECTIVE | |
| OFFICE | HOLDER | 31-12-2013 | 30-09-2014 | 30-09-2014 | ||
| Investment fund for cinema and audiovisuals |
Portugal | Investments in cinema and audiovisual production | NOS | 30,12% | 30,12% | 30,12% |
| Turismo da Samba (Tusal), SARL (a) | Luanda | n.a. | NOS | 30,00% | 30,00% | 30,00% |
| Filmes Mundáfrica, SARL (a) | Luanda | Movies exhibition | NOS | 23,91% | 23,91% | 23,91% |
| Companhia de Pesca e Comércio de Angola (Cosal), SARL (a) |
Luanda | n.a. | NOS | 15,76% | 15,76% | 15,76% |
| Telemática, S.A. | Lisbon | Telecommunication services | NOS | 5,00% | 5,00% | 5,00% |
| Apor - Agência para a Modernização do Porto |
Porto | Development of modernizing projects in Oporto | NOS | 3,98% | 3,98% | 3,98% |
| Lusitânia Vida - Companhia de Seguros, S.A ("Lusitânia Vida") |
Lisbon | Insurance services | NOS | 0,03% | 0,03% | 0,03% |
| Lusitânia - Companhia de Seguros, S.A ("Lusitânia Seguros") |
Lisbon | Insurance services | NOS | 0,04% | 0,04% | 0,04% |
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.
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