Earnings Release • May 27, 2016
Earnings Release
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| 1Q16 Highlights |
4 |
|---|---|
| Corporate Bodies |
5 |
| Management Report |
6 |
| Consolidated Financial Statements |
21 |
| 1Q16 Highlights | 1Q15 | 1Q16 | 1Q16 / 1Q15 |
|---|---|---|---|
| Financial Highlights | |||
| Operating Revenues | 344.1 | 370.3 | 7.6% |
| Telco Revenues | 327.7 | 352.5 | 7.6% |
| EBITDA | 127.9 | 137.9 | 7.8% |
| EBITDA Margin | 37.2% | 37.2% | 0.1 pp |
| Net Income Before Associates & Non-Controlling Interests | 15.9 | 30.8 | 94.1% |
| Net Income | 23.2 | 24.4 | 5.0% |
| Operational Highlights | |||
| Total RGUs | 7,790.4 | 8,595.0 | 10.3% |
| Mobile | 3,730.4 | 4,173.0 | 11.9% |
| Pay TV | 1,488.6 | 1,561.5 | 4.9% |
| IRIS Subscribers | 742.6 | 899.6 | 21.1% |
| Convergent RGUs | 2,194.5 | 2,988.6 | 36.2% |
| Convergent Customers | 456.8 | 614.8 | 34.6% |
| Convergent Customers as % of Fixed Access Customers | 34.0% | 42.8% | 8.8 pp |
| Residential ARPU / Unique Subscriber With Fixed Access (Euros) | 41.4 | 43.7 | 5.4% |
As at the date of this report, 26 April 2016, NOS' Governing Bodies had the following composition:
| Board of Directors | |
|---|---|
| Chairman of the Board of Directors | Jorge de Brito Pereira |
| Chairman of the Executive Committee | Miguel Almeida |
| Members of the Executive Committee | José Pedro Pereira da Costa, Vice-Presidente, CFO Ana Paula Marques André Almeida Manuel Ramalho Eanes |
| Members | Angelo Paupério António Lobo Xavier António Domingues Catarina Tavira Cláudia Azevedo Fernando Martorell Isabel dos Santos Joaquim de Oliveira Lorena Fernandes |
| Chairman of the Fiscal Board | Mário Leite da Silva Paulo Cardoso Correia 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 |
| Statutory Auditor | |
| In Office | ERNST & YOUNG AUDIT & ASSOCIADOS, SR S.A., (ROC number 178 and registered at CM) with the number 9011, represented by Ricard Filipe de Frias Pinheiro (ROC number 739); |
NOS is the largest Pay TV provider in Portugal with 1.561 million subscribers and a market share of over 44% at the end of 2015. NOS continues to deliver strong growth in subscribers every quarter with net adds 17.7 thousand in 1Q16, of which 14.3 thousand over fixed access and the remainder over DTH. In addition to the success of convergent take-up and network expansion, net adds have also benefitted from very good progression in churn levels which are around 20% lower yoy due to a clear focus on proactive retention and maximizing customer satisfaction levels. In addition to the numerous product innovation and customer service awards received over the past year, such as the "Leading operator providing Pay TV, BB, voice and mobile" in November 2015, in 1Q16 NOS was recognized as the "most trusted brand" in the Portuguese telecom sector by consumers.
Total RGUs grew by 10.3% yoy to 8.595 million services in 1Q16, reflecting the continued success of NOS' convergent strategy. Compared with 1Q15, the number of customers subscribing to convergent services has increased by 34.6% to 615 thousand, representing 39.4% of the total Pay TV base. Of the fixed access Pay TV subs, 42.8% already are convergent customers, up from 34% at the end of 1Q15.
Going digital is a key element of product strategy and NOS has been consistently at the forefront of the market when it comes to delivering a richer and more relevant value proposition to customers. In 1Q16 NOS introduced a material increase in the mobile data offer within its flagship convergent package with the launch of "Quatro 3GB" providing 163 TV channels over the IRIS platform, 200 Mbps fixed broadband, unlimited fixed voice, free mobile calls and SMSs and 3GB of mobile data per SIM card, for up to 4 SIM cards and that can be distributed at will between each user. Although still at an early stage of launch, take-up is very encouraging and helping to drive continued growth in smartphone penetration and usage which stand respectively at 63% and 905MB per month. On the content front, guaranteeing access to the best available content for customers is a priority and NOS continuously reviews its channel line-up to ensure a top quality viewing experience. Of the new channels included in the programming grid over the past months, it is worth highlighting the resonating success of CMTV, included in January, which has since then jumped from the #9 to the #6 position in terms of pay TV ranking with a share of 2.5%.
Led by strong growth of the Pay TV base, increasing convergent penetration and the increase in the number of B2B accounts and services sold, fixed broadband and voice services also posted strong performance in 1Q16 with net adds of 37.7 thousand and 24.5 thousand respectively.
In mobile, net adds in 1Q16 were 50.0 thousand, composed of 70.3 thousand net adds in post-paid mobile services and a net decline in pre-paid users of 20.4 thousand. The pace of growth in convergent mobile services is naturally starting to slow down due to the already high levels of convergent penetration at 42.8% of fixed Pay TV customers. Pre-paid mobile subscribers fell primarily due to seasonal pre-paid disconnections that tend to occur following the strong build up to Christmas.
New accounts won in the large corporate segment over past quarters continue to translate into material yoy revenue growth. Key business accounts were won across all sectors, ranging from financial, to health, public sector, retail and transport, amongst others, and further reinforcing NOS' position as a leading and reliable provider of integrated telecom and IT services for the large corporate world driving customer revenue growth from this segment of 11.4% in 1Q16. On the mass business front, NOS is keeping up a strong pace of RGU growth and yoy revenue trends have starting to approach a more encouraging trend and getting close to positive territory in 1Q16 at negative 1.0% compared with negative 9.8% in 1Q15, due to the fact that volume growth in services and accounts is getting close to compensating for the like-for-like decline in revenues per account, consequence of the still challenging pricing environment in this segment.
Average revenues per household continue to grow as a result of the continued growth in convergent bundles and cross-selling of services to the residential customer base. Residential Fixed ARPU increased by 5.4% yoy to 43.7 euros in 1Q16. In the business segment, ARPU per RGU was still negative yoy although the pace of decline has improved significantly due to the progressively lower level of backbook repricing that has been affecting the Mass Business segment in particular.
| Operating Indicators ('000) | 1Q15 | 4Q15 | 1Q16 | 1016 / 1015 1016 / 4015 | |
|---|---|---|---|---|---|
| Telco (1) | |||||
| Aggregate Indicators | |||||
| Homes Passed | 3,393.0 | 3,600.1 | 3,632.8 | 7.1% | 0.9% |
| Total RGUs | 7,790.4 | 8,464.8 | 8,595.0 | 10.3% | 1.5% |
| Mobile | 3,730.4 | 4,123.1 | 4,173.0 | 11.9% | 1.2% |
| Pre-Paid | 2,025.0 | 2,075.5 | 2,055.2 | 1.5% | (1.0%) |
| Post-Paid | 1,705.4 | 2,047.5 | 2,117.9 | 24.2% | 3.4% |
| ARPU / Mobile Subscriber (Euros) | 8.8 | 8.6 | 8.5 | $(4.0\%)$ | (0.9% |
| Pay TV | 1,488.6 | 1,543.8 | 1,561.5 | 4.9% | 1.1% |
| Fixed Access (2) | 1,174.0 | 1,215.3 | 1,229.7 | 4.7% | 1.2% |
| DTH | 314.6 | 328.5 | 331.8 | 5.5% | 1.0% |
| Fixed Voice | 1,522.0 | 1,623.3 | 1,647.9 | 8.3% | 1.5% |
| Broadband | 1,027.3 | 1,144.7 | 1,182.4 | 15.1% | 3.3% |
| Others and Data | 22.0 | 29.9 | 30.2 | 37.2% | 0.9% |
| 3,4&5P Subscribers (Fixed Access) | 878.1 | 968.4 | 995.4 | 13.4% | 2.8% |
| % 3,4&5P (Fixed Access) | 74.8% | 79.7% | 80.9% | 6.2 pp | 1.3 pp |
| Convergent RGUs | 2,194.5 | 2,853.7 | 2,988.6 | 36.2% | 4.7% |
| Convergent Customers | 456.8 | 590.8 | 614.8 | 34.6% | 4.0% |
| Fixed Convergent Customers as % of Fixed Access Customers | 34.0% | 41.9% | 42.8% | 8.8 pp | 0.9 pp |
| % Convergent Customers | 30.7% | 38.3% | 39.4% | 8.7pp | 1.1 pp |
| IRIS Subscribers | 742.6 | 865.0 | 899.6 | 21.1% | 4.0% |
| IRIS as % of 3,4&5P Subscribers (Fixed Access) | 84.6% | 89.3% | 90.4% | 5.8 pp | 1.0 pp |
| Net Adds | |||||
| Homes Passed | 67.3 | 56.6 | 32.7 | (51.4%) | (42.2%) |
| Total RGUs | 164.8 | 188.2 | 130.2 | (21.0%) | (30.8%) |
| Mobile | 87.2 | 98.0 | 50.0 | (42.7%) | $(49.0\%)$ |
| Pre-Paid | (36.2) | 9.9 | (20.4) | (43.7%) | n.a. |
| Post-Paid | 123.4 | 88.1 | 70.3 | $(43.0\%)$ | (20.1%) |
| Pay TV | 11.9 | 21.8 | 17.7 | 49.2% | $(19.0\%)$ |
| Fixed Access (2) | 7.4 | 17.2 | 14.3 | 93.5% | (16.8%) |
| DTH | 4.5 | 4.6 | 3.4 | (24.5%) | (27.1%) |
| Fixed Voice | 29.3 | 28.6 | 24.5 | (16.3%) | (14.2%) |
| Broadband | 34.4 | 39.0 | 37.7 | 9.6% | $(3.4\%)$ |
| Others and Data | 2.0 | 0.8 | 0.3 | (86.2%) | (62.7%) |
| 3,4&5P Subscribers (Fixed Access) | 26.4 | 31.7 | 27.0 | 2.0% | (14.9%) |
| Convergent RGUs | 341.3 | 188.8 | 134.8 | (60.5%) | (28.6%) |
| Convergent Customers | 72.2 | 35.2 | 23.9 | $(66.9\%)$ | (32.0%) |
| IRIS Subscribers | 49.0 | 39.9 | 34.5 | $(29.6\%)$ | $(13.4\%)$ |
(1) Portuguese Operations
(2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| (1) Portuguese Operations | |||
|---|---|---|---|
(2) Fixed Access Subscribers include customers served by the HFC, FTTH and ULL networks and indirect access customers.
| (1) Portuguese Operations | |||
|---|---|---|---|
NOS' Cinema ticket sales posted a yoy increase of 21.1% to 2.4 million tickets, which compares with an increase in total market ticket sales of 19.0%1. We should note that the Easter holiday period took place almost fully in 1Q16, whereas in 2015 it fell both in 1Q15 and 2Q15.
The most successful films shown in 1Q16 were "Deadpool", "Zootopia", "The Revenant", "Kung Fu Panda 3" and "Star Wars: The Force Awakens".
NOS opened the first IMAX® DMR - Digital 3D screen in Lisbon in June 2013, with a second screen opening in Oporto in April 2015. Having now completed 3 years of operation, this premium cinema experience continues to prove very successful.
Maintaining its track record as a pioneering cinema operator, NOS opened two 4DX screens in greater Oporto (GaiaShopping) and Lisbon (Almada Forum) in March and April 2016, respectively. This state-of-the-art technology provides a completely immersive and multidimensional premium cinema experience, through 20 different effects, such as movement and environmental effects including wind, rain, scent or smoke, synchronised with the images on the screen.
Average revenue per ticket sold posted a yoy improvement of 2.8% to 4.8 euros in 1Q16.
NOS' gross box-office revenues increased by 19.6% in 1Q16, which compares with 18.9% for the market as a whole, as NOS continues to maintain its leading market position, with a market share of 60.5% in terms of gross revenues in 1Q16. Total Cinema Exhibition revenues improved by 13.8% yoy in 1Q16 to 15.7 million euros.
Revenues in the Audiovisuals division declined by 3.2% yoy to 16.1 million euros in 1Q16. This decline in revenues was driven primarily by the performance in Cinema Distribution and Homevideo, partially offset by an improvement in the rights and television management area. Of the top 10 cinema box-office hits in 1Q16, NOS distributed 6, "Zootopia", "Star Wars: The Force Awakens", "London Has Fallen", "Batman V Superman: Dawn of Justice", "The Big Short" and "Dirty Grandpa", therefore maintaining its leading position, albeit with a smaller market share yoy.
1 Source: ICA – Portuguese Institute For Cinema and Audiovisuals
ZAP is a reference operator in Angola and Mozambique, with continued success of its commercial operations. Currently its commercial footprint is present in all the Angolan and Mozambican provinces through own stores and authorized agents, enabling the population of 50 million people in these countries to have access to ZAP's services.
Following the launch of "ZAP Fibra", a TV and internet bundle based on an FTTH solution, in the first quarter of 2015, ZAP is now engaged in growing its FTTH subscribers and increasing the footprint of its network. During this quarter, the focus was to expand the network in the city centre of Luanda.
During this quarter ZAP inaugurated a new cinema complex in Luanda, with 7 screens and 1,360 seats. This is a fully digital complex equipped with state-ofthe-art technology including the first IMAX theatre in Angola.
The operational performance of ZAP remains very solid however the challenging macroeconomic backdrop driven by the worldwide decline in oil prices has been the cause of a material currency devaluation, with the kwanza down by 32.8% against the USD and 35.1% against the Euro (1Q16 vs 1Q15). The financial implications for ZAP have been a strong decline in operating margin due to the fact that a number of relevant supplier contracts are priced in USD and Euros, and there have been difficulties felt in payments to suppliers as a consequence of limitations placed on foreign currency payments by the Central Angolan Bank. As such, the financial contribution of ZAP to NOS results has declined significantly as explained in the financial review ahead.
(2) Commercial costs include commissions, marketing and publicity expenses and costs of equipment sold.
(3) EBIT = Income Before Financials and Income Taxes.
Consolidated Operating Revenues grew by 7.6% in 1Q16 to 370.3 million euros, accelerating yoy growth from 5.8% in 3Q15 and 6.4% in 4Q15, propelled by the very strong operational momentum in the core telco operation, which increased revenues by the same amount at 7.6% yoy to 352.5 million euros, and strong yoy growth in cinema exhibition revenues which increased by 13.8% yoy to 15.7 million euros. The audiovisuals division posted a yoy decline of 3.2% mainly due to the fact that in 1Q16 NOS posted a lower than usual share of movie distribution in the quarter.
The pace of growth recorded in core telco revenues is a key enabler for NOS' strategic revenue market share target. In 4Q15, according to data published by the operators, NOS had already achieved a 29.5% share of revenues of the Portuguese telecom market, up 3.5 pp from 4Q13, the first full quarter after completion of the merger. Importantly, NOS is the only operator in the market to be growing telco revenues and subsequently market share.
Within the telco segment, trends remained on the same track as in previous quarters. Consumer telco revenues posted a 6.3% increase yoy to 223.5 million euros driven by the very strong operational momentum in this segment. Residential customer revenues increased by 9% yoy and now represent over 85% of total consumer segment revenues. Stand alone personal revenues posted a decline of 6.9% yoy reflecting primarily some continued migration of services to residential convergent packages and the continued change in standalone customer mix reflecting a higher proportion of lower monthly bill pre-paid subscribers.
Business and wholesale telco revenues increased by 8% yoy to 99.6 million euros as a result of higher revenues from corporate customers, up by 11.4% yoy, reflecting NOS' increased market share in this segment and also of the improving yoy trends in Mass Business, which declined by just 1% yoy compared with a decline of 9.8% in 1Q15, thus managing to offset still falling average revenues per RGU with good growth in volume. Wholesale revenues recorded a 14.3% increase yoy in 1Q16.
Cinema revenues posted still a very strong quarter yoy, up by 13.8% yoy to 15.7 million euros, with a very good yoy performance in terms of attendance growth of 21.1%. A more positive consumer sentiment in Portugal and popular movie slate have translated into consistently higher levels of movie going. Audiovisuals revenues posted a yoy decline of 3.2% to 16.1 million euros mainly due to the fact that in 1Q16, some of the more successful movies exhibited were not distributed by NOS and therefore led to a reduction in share of overall distribution during the quarter.
Revenues from ZAP, the African Pay TV joint venture increased by 24.1% in local currency but declined by 5.7% yoy to 16.5 million euros for NOS' 30% stake. As explained in the operational review, ZAP continues to record good subscriber growth yoy however the challenging macroeconomic situation reflected in the severe devaluation in local currency resulting from the fall in oil prices is leading to a general deterioration in business activity.
Consolidated EBITDA grew by 7.8% yoy to 137.9 million euros representing an EBITDA margin for the quarter of 37.2%, reflecting the positive revenue momentum described above. The telco business recorded a 7.6% yoy growth in 1Q16 and Audiovisuals and Cinemas were also strong contributors to consolidated EBITDA growth with EBITDA up by 9.2% yoy in 1Q16 to 12.1 milion euros.
The EBITDA of NOS' 30% stake in ZAP declined by 70% yoy to 2.2 million euros representing an EBITDA margin of 13.2% compared with 41.5% in 1Q15. Operating Costs at ZAP continue under pressure due the fact that a significant proportion of supplier contracts are USD and Euro based, thus putting pressure on margins.
Consolidated Operating Costs grew by 7.5% yoy to 232.4 million euros impacted by intense commercial activity related costs and focus on growth. A number of structural intregration and transformational projects namely within the IT arena are underway and within the planned timeframe, however given their long time to develop, test and deploy, will only start to have a more material impact towards the end of this year and into 2017.
Wages and Salaries posted a 10.3% increase yoy to 23.8 million euros however in line with the levels of 4Q15, reflecting the increased average headcount of 30 FTEs to 2.507 thousand impacted primarily by increased recruitment in telco operations to support the growth momentum of the business.
Direct Costs grew by 7.5% yoy to 108.8 million euros influenced primarily by the higher activity related interconnection and telecom costs, up 7.8% yoy. As in previous quarter, Interconnection costs were also much higher year on year as a result of the significant increase in mobile customers who are subscribing to all-net mobile tariffs included in convergent tariff plans, thus driving higher termination costs from increased volumes of calls made to other operator networks. Programming costs grew by 12.7% yoy however the increase was offset by a similar absolute decline in cinema distribution royalties due to the previously mentioned decline in audiovisuals market share in 1Q16.
Commercial Costs increased by 20.8% yoy to 25.6 million euros due primarily to a 44.5% increase in COGS led by much higher volumes of terminal equipment sold in comparison with the previous year as a result of the focus on increasing smartphone penetration across the base. Recurrent marketing and publicity costs also increased yoy by 26.9% driven by investment in raising awareness to the NOS brand and new product and service launches.
Other Operating Costs increased 2.8% to 74.1 million euros with the main components posting relatively stable performance in comparison with 1Q15 and with 4Q15 with the exception of a decline in provisions qoq.
Net Income before Associates and Non-Controlling interests increased by 94.1% yoy to 30.8 million euros in 1Q16, compared with 15.9 million euros in 1Q15 and with 10.5 million euros in 4Q15.
declined significantly to negative 6.4 million euros in 1Q16 as a result of the reduction in the contribution of the 30% stake in ZAP and of Sport TV. Net Income contribution from ZAP reduced from 6.5 million euros to negative 4.2 million euros, as a result of the aforementioned currency devaluation in Angola driving lower operating margins, with EBITDA down by 70% yoy, and due to the negative below EBITDA charge of the foreign exchange impact on USD trade accounts, in the amount of 4.9 million euros. Sport TV's contribution to Net income also declined to negative 2.6 million euros due to non-recurrent charges in 1Q16.
Depreciation and Amortization increased by 8.7% yoy to 95.3 million euros due, as in previous periods, to the higher level of investment in both network assets and customer related costs.
Other Expenses* of 2.4 million euros in 1Q16 relate to non-recurrent costs, with merger related integration costs representing just 1.4 million euros of this amount, compared with 2.6 million euros in 1Q15.
Net Financial Expenses fell by 54.5% in 1Q16 to 5.4 million euros as a result of the lower average cost of new debt arising from lower funding costs on refinancing activity during 2015. Further details on funding developments are presented in the capital structure section below.
Income Tax provision amounted to 4 million euros in 1Q16 representing 14% as a percentage of Income before Income Taxes, down from 21.8% in 1Q15 explained primarily by the recognition of deferred tax assets in the quarter.
* In accordance with IAS 1, the caption "Other expenses" reflects material and unusual expenses that should be disclosed separately from usual line items, to avoid distortion of the financial information from regular
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.
| CAPEX (Millions of Euros) | 1015 | 4015 | 1016 | 1016 / 1015 1016 / 4015 | |
|---|---|---|---|---|---|
| Telco | 84.8 | 102.8 | 84.9 | $0.1\%$ | $(17.4\%)$ |
| Baseline Telco | 22.8 | 34.2 | -27.5 | 21.0% | $(19.6\%)$ |
| Customer Related | 47.3 | 49.9 | 43.0 | $(9.1\%)$ | $(13.9\%)$ |
| Network Expansion / Substitution and Integration Projects and Others |
14.8 | 18.7 | 14.4 | $(2.8\%)$ | $(23.1\%)$ |
| Audiovisuals and Cinema Exhibition | 9.5 | 10.9 | 10.2 | 7.3% | $(6.1\%)$ |
| Total Group | 94.3 | 113.7 | 95.1 | 0.8% | (16.3%) |
To better explain the underlying trends and potential for reduction in total CAPEX at NOS, this quarter's reporting has been adapted to make a clearer distinction between what is effectively baseline investment required to run the operation, without any consideration of customer related CAPEX and total CAPEX.
Network Expansion / Substitution and Integration Projects telco CAPEX includes primarily investment in network expansion and replacement and some remnants of integration related investments required to materialize operational synergies and efficiencies in the long-run. Customer related CAPEX's main three components are customer premise terminal equipment, sales commissions and installation fees.
NOS is currently undergoing a period of high total CAPEX due firstly to the investment being made in new network rollout that, since effective launch of civil works in the second half of 2014, has already covered an additional 380 thousand households. On the commercial front, NOS is growing its customer base well ahead of what can be deemed a recurrent pace of customer acquisition and as such is incurring a higher than run-rate level of investment in customer acquisition costs. Both of these investment drivers are set to reduce significantly as the network expansion project reaches conclusion by the end of 2016 and as the pace of customer growth eventually starts to taper away to more normalized levels in the longer term.
In 1Q16, Telco CAPEX was 84.9 million euros representing an increase of 0.1% in comparision with 1Q15. Baseline Telco CAPEX increased by 21.0% to 27.5 million euros. As a percentage of telecom revenues, baseline telco CAPEX was 7.8% in 1Q16, whereas Telco CAPEX represented 24.1% of Telco Revenues, a decrease in comparison with 25.9% as of 1Q15.
Investment in Customer Related CAPEX recorded a yoy decline of 9.1% in 1Q16 due to the lower comparative volume of RGU growth recorded in comparision with 1Q15 as shown in the operating tables earlier in this report. As a percentage of telco revenues, Customer Related CAPEX represented 12.2% in 1Q16 and as a percentage of Total Group CAPEX, 45.2%.
Audiovisuals and Cinema Exhibition CAPEX of 10.2 million euros relates essentially to the Audiovisuals division and reflects capitalization of certain movie rights. Accompanying the yoy growth in cinema and audiovisual activity this item also recorded growth to the effect of 7.3%.
Total Group CAPEX increased by just 0.8% yoy to 95.1 million euros, representing 25.7% of Consolidated Revenues, down yoy from 27.4%.
| Cash Flow (Millions of Euros) | 1Q15 | 4Q15 | 1Q16 | 1016 / 1015 1016 / 4015 | |
|---|---|---|---|---|---|
| EBITDA | 127.9 | 123.3 | 137.9 | 7.8% | 11.9% |
| Total CAPEX | (94.3) | (113.7) | (95.1) | 0.8% | (16.3%) |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(24.9) | 16.1 | (19.8) | (20.3%) | n.a. |
| Operating Cash Flow | 8.7 | 25.7 | 22.9 | 163.7% | $(10.6\%)$ |
| Long Term Contracts | (4.1) | (4.0) | (3.8) | (6.7%) | (4.3%) |
| Cash Restructuring Payments | (6.1) | (6.1) | (3.4) | $(43.9\%)$ | $(43.6\%)$ |
| Interest Paid | (5.3) | (2.7) | (5.5) | 2.4% | 105.1% |
| Income Taxes Paid | (1.9) | (1.4) | (0.9) | (53.5%) | (39.5%) |
| Disposals | 0.2 | 1.7 | 0.4 | 103.6% | (76.2%) |
| FCM Receivables | 0.0 | 0.0 | 0.0 | n.a. | n.a. |
| Other Movements | 0.0 | 0.2 | 0.0 | 30.8% | (85.3%) |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
(8.6) | 13.3 | 9.7 | n.a. | $(26.9\%)$ |
| Acquisition of Own Shares | 0.0 | (3.6) | (7.3) | n.a. | 105.8% |
| Foreign Currency Debt Exchange Effect | (0.0) | 0.0 | 0.0 | n.a. | n.a. |
| Dividends | 0.0 | 0.0 | 0.0 | n.a. | n.a. |
| Free Cash Flow | (8.6) | 9.8 | 2.4 | n.a. | (75.5%) |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
(7.2) | (7.5) | (1.7) | $(76.0\%)$ | (77.1%) |
| Change in Net Financial Debt | (15.7) | 2.3 | 0.7 | n.a. | (70.3%) |
Cash Flow reporting has also been adjusted this quarter to reflect the clarification in CAPEX reporting.
Total Operating Cash Flow posted a yoy increase to 22.9 million euros in 1Q16 led by the strong growth in EBITDA and relatively stable level of CAPEX yoy. The level of working capital and non-cash items in total CAPEX was also supportive of the improvement in OCF with a yoy decline of 20.3% to 19.8 million euros.
Total FCF before dividend payments, financial investments and own share acquisitions posted a material improvement from negative 8.6 million euros in 1Q15 to 9.7 million euros in 1Q16, due to higher OCF and due to the decrease in cash restructuring payments associated with the merger (lower by 2.7 million euros yoy), and decrease in cash income tax payments (lower by 1 million euros yoy).
Free Cash Flow improved from negative 8.6 million euros in 1Q15 to positive 2.4 million euros in 1Q16 as a result of the aforementioned effects and impacted by an increase in own share acquisition of 7.3 million euros in 1Q16 led by ongoing share repurchases in the market to cover share plan obligations and that were accelerated over the past few months taking advantage of recent share price weakness.
| Balance Sheet (Millions of Euros) | 2015 | 1Q16 |
|---|---|---|
| Non-current Assets | 2,510.1 | 2,459.7 |
| Current Assets | 466.4 | 521.0 |
| Total Assets | 2,976.5 | 2,980.7 |
| Total Shareholders' Equity | 1.063.5 | 1,080.8 |
| Non-current Liabilities | 1,150.7 | 1,164.6 |
| Current Liabilities | 762.2 | 735.3 |
| Total Liabilities | 1,913.0 | 1,899.9 |
| Total Liabilities and Shareholders' Equity | 2,976.5 | 2,980.7 |
At the end of 1Q16, Net Financial Debt stood at 1,047.7 million euros.
Total financial debt was 1,049.5 million euros, which was offset with a cash and short-term investment position on the balance sheet of 1.8 million euros. At the end of 1Q16, NOS also had 260 million euros of non-issued commercial paper programmes. The all-in average cost of NOS' Net Financial Debt stood at 2.38% for 1Q16, down from 3.70% in 1Q15 and from 2.48% in 4Q15.
Net Financial Gearing was 49.2% at the end of 1Q16 and Net Financial Debt / EBITDA (last 4 quarters) now stands at 1.9x. The average maturity of NOS' Net Financial Debt at the end of 1Q16 was 3.3 years.
Taking into account the loans issued at a fixed rate and the interest rate hedging operations in place the proportion of NOS' issued debt that is protected against variations in interest rates is approximately 55%.
| Net Financial Debt (Millions of Euros) | 1Q16 | 1Q16 / 2015 | |
|---|---|---|---|
| Short Term | 160.0 | 144.4 | $(9.8\%)$ |
| Bank and Other Loans | 141.7 | 123.9 | $(12.6\%)$ |
| Financial Leases | 18.3 | 20.5 | 12.0% |
| Medium and Long Term | 898.3 | 905.1 | $0.8\%$ |
| Bank and Other Loans | 862.6 | 873.1 | 1.2% |
| Financial Leases | 35.8 | 32.1 | $(10.4\%)$ |
| Total Debt | 1,058.3 | 1,049.5 | $(0.8\%)$ |
| Cash and Short Term Investments | 9.9 | 1.8 | $(81.9\%)$ |
| Net Financial Debt | 1,048.4 | 1,047.7 | $(0.1\%)$ |
| Net Financial Gearing (1) | 49.6% | 49.2% | (0.4 pp ) |
| Net Financial Debt / EBITDA | 2.0x | 1.9x | n.a. |
(1) Net Financial Gearing = Net Financial Debt / (Net Financial Debt + Total Shareholders' Equity).
(Amounts stated in thousands of euros)
| ASSETS NON - CURRENT ASSETS Tangible assets 7 1,167,538 1,142,009 Investment property 698 691 Intangible assets 8 1,178,559 1,179,035 Investments in jointly controlled companies and 9 29,922 6,718 associated companies Accounts receivable - other 10 7,182 6,869 Tax receivable 11 3,617 3,617 Available-for-sale financial assets 77 Deferred income tax assets 12 122,539 120,652 TOTAL NON - CURRENT ASSETS 2,510,132 2,459,668 CURRENT ASSETS: Inventories 13 30,540 32,938 Accounts receivable - trade 14 347,837 349,564 Accounts receivable - other 10 11,135 27,803 |
|---|
| Tax receivable 11 2,242 1,122 |
| Prepaid expenses 15 64,660 83,567 |
| Non-current assets held-for-sale 16 - 24,237 |
| Cash and cash equivalents 18 9,948 1,796 |
| TOTAL CURRENT ASSETS 466,362 521,027 |
| TOTAL ASSETS 2,976,494 2,980,695 |
| SHAREHOLDER'S EQUITY |
| Share capital 19.1 5,152 5,152 |
| Capital issued premium 19.2 854,219 854,219 |
| Own shares 19.3 (10,559) (6,095) |
| Legal reserve 19.4 3,556 3,556 |
| Other reserves and accumulated earnings 19.4 119,004 190,122 |
| Net income 82,720 24,416 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS 1,054,092 1,071,370 |
| Non-controlling interests 20 9,430 9,459 |
| TOTAL EQUITY 1,063,522 1,080,829 |
| LIABILITIES |
| NON - CURRENT LIABILITIES |
| Borrowings 21 979,422 982,919 |
| Provisions 22 139,484 140,585 |
| Accounts payable - other 26 - 8,343 |
| Accrued expenses 23 9,470 9,297 |
| Deferred income 24 5,259 5,124 |
| Derivative financial instruments 17 3,369 5,381 |
| Deferred income tax liabilities 12 13,739 12,905 |
| TOTAL NON - CURRENT LIABILITIES 1,150,743 1,164,554 |
| CURRENT LIABILITIES: |
| Borrowings 21 178,022 159,297 |
| Accounts payable - trade 25 327,485 304,613 |
| Accounts payable - other 26 28,706 45,632 |
| Tax payable 11 23,296 22,880 |
| Accrued expenses 23 175,871 173,776 |
| Deferred income 24 28,802 28,887 |
| Derivative financial instruments 17 47 227 |
| TOTAL CURRENT LIABILITIES 762,229 735,312 TOTAL LIABILITIES 1,912,972 1,899,866 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY 2,976,494 2,980,695 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of financial position as at 31 March 2016.
(Amounts stated in thousands of euros)
| NOTES | 3M 15 | 3M 16 | |
|---|---|---|---|
| REVENUES: | |||
| Services rendered | 329,224 | 349,085 | |
| Sales | 12,130 | 17,090 | |
| Other operating revenues | 2,721 | 4,128 | |
| 27 | 344,075 | 370,303 | |
| COSTS, LOSSES AND GAINS: | |||
| Wages and salaries | 28 | 21,601 | 23,825 |
| Direct costs | 29 | 101,241 | 108,824 |
| Costs of products sold | 30 | 9,808 | 14,171 |
| Marketing and advertising | 6,558 | 8,324 | |
| Support services | 31 | 24,912 | 23,697 |
| Supplies and external services | 31 | 45,797 | 44,674 |
| Other operating losses / (gains) | 122 | 118 | |
| Taxes | 6,860 | 7,038 | |
| Provisions and adjustments | 32 | (740) | 1,760 |
| Depreciation, amortisation and impairment losses | 7, 8 and 33 | 87,694 | 95,293 |
| Reestructuring costs | 2,627 | 2,364 | |
| Losses / (gains) on sale of assets, net | (15) | (37) | |
| Other losses / (gains) non recurrent net | 3,478 | 101 | |
| 309,943 | 330,152 | ||
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 34,132 | 40,151 | |
| Net foreign exchange losses / (gains) | 9 and 34 | (7,343) | 6,365 |
| Net losses / (gains) on financial assets | 35 | 7,482 | 3,455 |
| Net losses / (gains) of affiliated companies | 732 | (95) | |
| Net other financial expenses / (income) | 35 | 3,586 | 2,004 |
| 4,457 | 11,729 | ||
| INCOME BEFORE TAXES | 29,675 | 28,422 | |
| Income taxes | 12 | 6,455 | 3,968 |
| NET CONSOLIDATED INCOME | 23,220 | 24,454 | |
| ATTRIBUTABLE TO: | |||
| NOS Group Shareholders | |||
| Non-controlling interests | 20 | (23) | 38 |
| EARNINGS PER SHARES | |||
| Basic - euros | 36 | 0.05 | 0.05 |
| Diluted - euros | 36 | 0.05 | 0.05 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of income by nature for the quarter ended on 31 March 2016.
(Amounts stated in thousands of euros)
| NOTES | 3M 15 | 3M 16 | |
|---|---|---|---|
| NET CONSOLIDATED INCOME | 23,220 | 24,454 | |
| OTHER INCOME | |||
| ITENS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT: | |||
| Accounting for equity method | 9 | (40) | (731) |
| Fair value of interest rate swap | 17 | (479) | (2,012) |
| Deferred income tax - interest rate swap | 17 | 108 | 453 |
| Fair value of exchange rate forward | 17 | 11 | (180) |
| Deferred income tax - exchange rate forward | 17 | 30 | 52 |
| Currency translation differences and others | (41) | (594) | |
| INCOME RECOGNISED DIRECTLY IN EQUITY | (411) | (3,012) | |
| TOTAL COMPREHENSIVE INCOME | 22,809 | 21,442 | |
| ATTRIBUTABLE TO: | |||
| NOS Group Shareholders | 22,832 | 21,404 | |
| Non-controlling interests | (23) | 38 | |
| 22,809 | 21,442 |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of comprehensive income for the quarter ended on 31 March 2016.
(Amounts stated in thousands of euros)
| NOTES | SHARE CAPITAL | CAPITAL ISSUED PREMIUM |
DISCOUNTS AND OWN SHARES, PREMIUMS |
LEGAL RESERVE | OTHER RESERVES AND ACCUMULATED EARNINGS |
NET INCOME | NON - CONTROLLING INTERESTS |
TOTAL | |
|---|---|---|---|---|---|---|---|---|---|
| BALANCE AS AT 1 JANUARY 2015 | 5,152 | 854,219 | (11,791) | 3,556 | 124,464 | 74,711 | 9,818 1,060,129 | ||
| Result appropriation | - | ||||||||
| Transfers to reserves | - | - | - | - | 74,711 | (74,711) | - | - | |
| Distribution of own shares - share incentive scheme | 19.3 | - | - | 8,880 | - | (9,862) | - | - | (982) |
| Distribuition of own shares - other remunerations | 19.3 | - | - | 6 | - | (6) | - | - | - |
| Share Plan - costs incurred in the period and others | 40 | - | - | - | - | 1,264 | - | 2 | 1,266 |
| Comprehensive Income | - | - | - | - | (411) | 23,243 | (23) | 22,809 | |
| Other | - | - | - | - | (100) | - | (14) | (114) | |
| BALANCE AS AT 31 MARCH 2015 | 5,152 | 854,219 | (2,905) | 3,556 | 190,060 | 23,243 | 9,783 1,083,108 | ||
| BALANCE AS AT 1 JANUARY 2016 | 5,152 | 854,219 | (10,559) | 3,556 | 119,004 | 82,720 | 9,430 1,063,522 | ||
| Result appropriation | - | ||||||||
| Transfers to reserves | - | - | - | - | 82,720 | (82,720) | - | - | |
| Acquisition of own shares | 19.3 | - | - | (7,729) | - | - | - | - | (7,729) |
| Distribution of own shares - share incentive scheme | 19.3 | - | - | 9,475 | - | (9,475) | - | - | - |
| Distribuition of own shares - other remunerations | 19.3 | - | - | 2,717 | - | (182) | - | - | 2,535 |
| Share Plan - costs incurred in the period and others | 40 | - | - | - | - | 1,068 | - | (9) | 1,059 |
| Comprehensive Income | - | - | - | - | (3,012) | 24,416 | 38 | 21,442 | |
| BALANCE AS AT 31 MARCH 2016 | 5,152 | 854,219 | (6,095) | 3,556 | 190,122 | 24,416 | 9,459 1,080,829 | ||
| As standard practice, only the annual accounts are audited, the quarterly results are not audited separately. The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity for the quarter ended on 31 March 2016. |
|||||||||
| Accountant | Board of Directors |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of changes in shareholders' equity for the quarter ended on 31 March 2016.
(Amounts stated in thousands of euros)
| NOTES | 3M 15 | 3M 16 | |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Collections from clients | 384,051 | 443,313 | |
| Payments to suppliers | (282,345) | (306,279) | |
| Payments to employees | (21,224) | (28,693) | |
| Receipts / (Payments) relating to income taxes | (1,822) | (1,491) | |
| Other cash receipts / (payments) related with operating | |||
| activities | 30,218 | 13,612 | |
| CASH FLOW FROM OPERATING ACTIVITIES (1) | 108,878 | 120,462 | |
| INVESTING ACTIVITIES | |||
| CASH RECEIPTS RESULTING FROM | |||
| Financial investments | 5 and 9 | - | 25,347 |
| Tangible assets | 186 | 484 | |
| Intangible assets | 6 | 5 | |
| Interest and related income | 2,550 | 2,957 | |
| 2,742 | 28,793 | ||
| PAYMENTS RESULTING FROM | |||
| Financial investments | 5 and 9 | - | (25,347) |
| Tangible assets | (62,776) | (58,662) | |
| Intangible assets | (47,635) | (45,724) | |
| (110,411) | (129,733) | ||
| CASH FLOW FROM INVESTING ACTIVITIES (2) | (107,669) | (100,940) | |
| FINANCING ACTIVITIES | |||
| CASH RECEIPTS RESULTING FROM | |||
| Borrowings | 770,173 | 110,000 | |
| 770,173 | 110,000 | ||
| PAYMENTS RESULTING FROM | |||
| Borrowings | (770,225) | (101,021) | |
| Lease rentals (principal) | (5,756) | (4,771) | |
| Interest and related expenses | (8,025) | (8,628) | |
| Aquisition of own shares | - | (7,349) | |
| (784,006) | (121,769) | ||
| CASH FLOW FROM FINANCING ACTIVITIES (3) | (13,833) | (11,769) | |
| Change in cash and cash equivalents (4)=(1)+(2)+(3) | (12,624) | 7,753 | |
| Effect of exchange differences | 5 | (97) | |
| Cash and cash equivalents at the beginning of the period | 19,591 | (29,348) | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 6,972 | (21,692) | |
| Cash and cash equivalents | 18 | 10,802 | 1,796 |
| Bank overdrafts | 21 | (3,830) | (23,488) |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 6,972 | (21,692) |
As standard practice, only the annual accounts are audited, the quarterly results are not audited separately.
The Notes to the Financial Statements form an integral part of the consolidated statement of cash flows for the quarter ended on 31 March 2016.
(Amounts stated in thousands of euros, unless otherwise stated)
NOS, SGPS, S.A. ("NOS", "NOS SGPS" or "Company"), formerly named ZON OPTIMUS, SGPS, S.A. ("ZON OPTIMUS") and until 27 august 2013 named ZON Multimédia – Serviços de Telecomunicações e Multimédia, SGPS, S.A. ("ZON"), with Company headquarters registered at Rua Actor António Silva, nº9, Campo Grande, was established by Portugal Telecom, SGPS, S.A. ("Portugal Telecom") on July 15, 1999 for the purpose of implementing its multimedia business strategy.
During the 2007 financial year, Portugal Telecom proceeded with the spin-off of ZON through the attribution of its participation in the company to their shareholders, which become fully independent from Portugal Telecom.
During the 2013 financial year, ZON and Optimus, SGPS, S.A. ("Optimus SGPS") have merged through the incorporation of Optimus SGPS into ZON. Thereafter, the Company adopted the designation of ZON OPTIMUS, SGPS, S.A..
On 20 June 2014, as a result of the launch of the new brand "NOS" on 16 May 2014, the General Meeting of Shareholders approved the change of the Company's name to NOS, SGPS, S.A..
The businesses operated by NOS and its associated companies, form the "NOS Group" or "Group", which includes cable and satellite television services, voice and Internet access services, video production and sale, advertising on Pay TV channels, cinema exhibition and distribution, the production of channels for Pay TV, management of data centers and consulting services in IT.
NOS shares are listed on the Euronext Lisbon market. The Group's shareholder's structure as at 31 March 2016 is shown in Note 19.
Cable and satellite television in Portugal is mainly provided by NOS Comunicações, S.A. ("NOS SA") and its subsidiaries, NOS Açores and NOS Madeira. These companies carry out: a) cable and satellite television distribution; b) the operation of the latest generation mobile communication network, GSM/UMTS/LTE; c) the operation of electronic communications services, including data and multimedia communication services in general; d) IP voice services ("VOIP" - Voice over IP); e) Mobile Virtual Network Operator ("MVNO"), and f) the provision of consultancy and similar services directly or indirectly related to the above mentioned activities and services. The business of NOS SA, NOS Açores and NOS Madeira is regulated by Law no. 5/2004 (Electronic Communications Law), which establishes the legal regime governing electronic communications networks and services.
NOSPUB and NOS Lusomundo TV operate in the television and content production business, and currently produce films and series channels, which are distributed, among other operators, by NOS SA and its subsidiaries. NOSPUB also manages the advertising space on Pay TV channels and in the cinemas of NOS Cinemas.
NOS Audiovisuais and NOS Cinemas, together with their associated companies, operate in the audiovisual sector, which includes video production and sale, cinema exhibition and distribution, and the acquisition/negotiation of Pay TV and VOD (video-on-demand) rights.
NOS Sistemas is a company dedicated to data center management and consulting services in IT.
A listing of the other Group companies and their respective business is included in the annexes to this report.
These Notes to the Consolidated Financial Statements follow the order in which the items are shown in the consolidated financial statements.
The consolidated financial statements for the quarter ended on 31 March 2016 were approved by the Board of Directors and their disclosure authorized on 26 April 2016.
The Board of Directors believes that the financial statements give a true and fair view of the Company's operations, financial performance and cash flows.
The principal accounting policies adopted in the preparation of the financial statements are described below. These policies were consistently applied to all the financial years presented, unless otherwise indicated.
The consolidated financial statements of NOS were prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), and Interpretations issued by the International Financial Reporting Committee ("IFRIC") or the previous Standing Interpretations Committee ("SIC"), adopted by the European Union, in force as at 1 January 2016.
These consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34"). Accordingly, these financial statements do not include all the information required by IFRS and should be read in conjunction with the consolidated financial statements for the year ended on 31 December 2015.
The consolidated financial statements are presented in euros as this is the main currency of the Group's operations. The financial statements of subsidiaries located abroad were converted into euros in accordance with the accounting policies described in Note 2.3.19.
The consolidated financial statements were prepared on a going concern basis from the ledgers and accounting records of the companies included in the consolidation (Annex A)), using the historical cost convention, adjusted where necessary for the valuation of financial assets and liabilities (including derivatives) at their fair value.
In preparing the consolidated financial statements in accordance with IFRS, the Board used estimates, assumptions and critical judgments with impact on the value of assets and liabilities and the recognition of income and costs in each reporting period. Although these estimates were based on the best information available at the date of preparation of the consolidated financial statements, current and future results may differ from these estimates. The areas involving a higher element of judgment and estimates are described in Note 3.
In the preparation and presentation of the consolidated financial statements, the NOS Group declares that it complies explicitly and without reservation with IAS/IFRS reporting standards and related SIC/IFRIC interpretations as approved by the European Union.
The standards and interpretations that became effective as of 1 January 2016 are as follows:
These changes had no material impact on the consolidated financial statements.
The following standards, interpretations, amendments and revisions, with mandatory application in future financial years have not, yet been endorsed by the European Union, at the date of approval of these financial statements:
IFRS 9 (new), "Financial instruments – classification and measurement" (effective for annual periods beginning on or after 1 January 2018). The initial phase of IFRS 9 forecasts two types of measurement: amortized cost and fair value. All equity instruments are measured at fair value. A financial instrument is measured at amortized cost only if the company has it to collect contractual cash flows and the cash flows represents principal and interest. Otherwise, financial instruments are measured at fair value through profit and loss.
The Group is calculating the impact of these changes and will apply these standards as soon as they become effective.
Controlled companies were consolidated by the full consolidation method. Control is deemed to exist when the Group is exposed or has rights, as a result of their involvement, to a variable return of the entity's activities, and has capacity to affect this return through the power over the entity. Namely, when the Company directly or indirectly holds a majority of the voting rights at a General Meeting of Shareholders or has the power to determine the financial and operating policies. In situations where the Company has, in substance, control of other entities created for a specific purpose, although it does not directly hold equity in them, such entities are consolidated by the full consolidation method. The entities in these situations are listed in Annex A).
The interest of third parties in the equity and net profit of such companies income presented separately in the consolidated statement of financial position and in the consolidated statement, respectively, under the item "Non-controlling Interests".
The identifiable acquired assets and the liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date, irrespective of the existence of non-controlled interests. The excess of acquisition cost over the fair value of the Group's share of identifiable acquired assets and liabilities is stated in Goodwill. Where the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the income statement in the period in which the acquisition occurs.
The interests of minority shareholders are initially recognised as their proportion of the fair value of the identifiable assets and liabilities.
On the acquisition of additional equity shares in companies already controlled by the Group, the difference between the share of capital acquired and the corresponding acquisition value is recognised directly in equity.
Where an increase in position in the capital of an associated company results in the acquisition of control, with the latter being included in the consolidated financial statements by the full consolidation method, the share of the fair values assigned to the assets and liabilities, corresponding to the percentages previously held, is stated in the income statement.
The directly attributable transaction costs are recognised immediately in profit or loss.
The results of companies acquired or sold during the year are included in the income statements as from the date of acquisition or until the date of their disposal, respectively.
Intercompany transactions, balances, unrealised gains on transactions and dividends distributed between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction shows evidence of impairment of the transferred asset.
Where necessary, adjustments are made to the financial statements of controlled companies in order to align their accounting policies with those of the Group.
The classification of investments as jointly controlled companies is determined based on the existence of shareholder agreements which show and regulate the joint control. Financial investments of jointly controlled companies (Annex C)) are stated by the equity method.
Under this method, financial investments are adjusted periodically by an amount corresponding to the share in the net profits of jointly controlled companies, as a contra entry in "Net Losses / (gains) of affiliated companies" in the income statement. Direct changes in the post-acquisition equity of jointly controlled companies are recognised as the value of the shareholding as a contra entry in reserves, in equity.
Additionally, financial investments may also be adjusted for recognition of impairment losses.
Any excess of acquisition cost over the fair value of identifiable net assets and liabilities (goodwill) is recorded as part of the financial investment of jointly controlled companies and subject to impairment testing when there are indicators of loss of value. Where the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the income statement in the period in which the acquisition occurs.
Losses in jointly controlled companies which exceed the investment made in them are not recognised, except where the Group has entered into undertakings with that company.
Dividends received from these companies are recorded as a reduction in the value of the financial investments.
In the quarter ended on 31 March 2016, the Group changed the presentation of the income resulting from the application of the equity method earnings before interest and income taxes to income before taxes.
An associated company is a company in which the Group exercises significant influence through participation in decisions about its financial and operating policies, but in which does not have control or joint control.
Any excess of the acquisition cost of a financial investment over the fair value of the identifiable net assets is recorded as goodwill and is added to the value of the financial investment and its recovery is reviewed annually or whenever there are indications of possible loss of value. Where the acquisition cost is less than the fair value of the identified net assets, the difference is recorded as a gain in the statement of comprehensive income in the period in which the acquisition occurs.
Financial investments in the majority of associated companies (Annex B)) are stated by the equity method. Under this method, financial investments are adjusted periodically by an amount corresponding to the share in the net profits of associated companies, as a contra entry in "Net Losses / (gains) of affiliated companies" in the income statement. Direct changes in the post-acquisition equity of associated companies are recognised as the value of the shareholding as a contra entry in reserves, in equity. Additionally, financial investments may also be adjusted for recognition of impairment losses.
Losses in associated companies which exceed the investment made in them are not recognised, except where the Group has entered into undertakings with that associated company.
Dividends received from these companies are recorded as a reduction in the value of the financial investments.
In the quarter ended on 31 March 2016, the Group changed the presentation of the income resulting from the application of the equity method earnings before interest and income taxes to income before taxes.
Balances and transactions and unrealised gains between Group companies, and between them and the parent company, are eliminated in the consolidation.
The part of unrealised gains arising from transactions with associated companies or jointly controlled companies attributable to the Group is eliminated in the consolidation. Unrealised losses are similarly eliminated except where they show evidence of impairment of the transferred asset.
As stipulated in IFRS 8, the Group presents operating segments based on internally produced management information.
Operating segments are reported consistently with the internal management information model provided to the chief operating decision maker of the Group, who is responsible for allocating resources to the segment and for assessing its performance, and for taking strategic decisions.
Realisable assets and liabilities due in less than one year from the date of the statement of financial position are classified as current in assets and liabilities, respectively.
In accordance with IAS 1, "Restructuring costs", "Losses / (gains) on disposal of assets " and "Other losses / (gains)" reflect unusual expenses that should be disclosed separately from the usual lines items, to avoid distortion of the financial information from regular operations.
Tangible assets are stated at acquisition cost, less accumulated depreciation and impairment losses, where applicable. Acquisition cost includes, in addition to the purchase price of the asset: (i) costs directly attributable to the purchase; and (ii) the estimated costs of decommissioning and removal of the assets and restoration of the site, which in Group applies to the cinema operation business, telecommunication towers and offices (Notes 2.3.12).
Estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence are recognised by a deduction from the corresponding asset as a contra entry in profit and loss. The costs of current maintenance and repairs are recognised as a cost when they are incurred. Significant costs incurred on renovations or improvements to the asset are capitalised and depreciated over the corresponding estimated payback period when it is probable that there will be future economic benefits associated with the asset and when these can be measured reliably.
Non-current assets (or discontinued operations), are classified as held for sale if their value is realisable through a sale transaction rather than through their continued use.
This situation is deemed to arise only where: (i) the sale is highly probable and the asset is available for immediate sale in its present condition; (ii) the Group has given an undertaking to sell; and (iii) it is expected that the sale will be realised within 12 months. In this case, noncurrent assets are valued at the lesser of their book value or their fair value less the sale costs.
From the time that certain tangible assets become deemed as "held for sale", the depreciation of such assets ceases and they are classified as non-current assets held for sale. Gains and losses on disposals of tangible assets, corresponding to the difference between the sale price and the net book value, are recognised in results in "Losses/gains on disposals of assets".
Tangible assets are depreciated from the time they are completed or ready to be used. These assets, less their residual value, are depreciated by the straight-line method, in twelfths, from the month in which they become available for use, according to the useful life of the assets defined as their estimated utility.
The depreciation rates used correspond to the following estimated useful lives:
| 2015 | 2016 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Buildings and other constructions | 2 - 50 | 2 - 50 |
| Technical equipment: | ||
| Network installations and equipment | 7 - 40 | 7 - 40 |
| Terminal equipment | 2 - 8 | 2 - 8 |
| Other telecommunication equipment | 3 - 10 | 3 - 10 |
| Other technical equipment | 1 - 16 | 1 - 16 |
| Transportation equipment | 3 - 4 | 3 - 4 |
| Administrative equipment | 2 - 10 | 2 - 10 |
| Other tangible assets | 4 - 8 | 4 - 8 |
Intangible assets are stated at acquisition cost, less accumulated amortisation and impairment losses, where applicable. Intangible assets are recognised only where they generate future economic benefits for the Group and where they can be measured reliably.
Intangible assets consist mainly of goodwill, satellite and distribution network capacity utilisation rights, customer portfolios, costs incurred in raising customers' loyalty contracts, telecom and software licenses, content utilisation rights and other contractual rights.
Goodwill represents the excess of acquisition cost over the net fair value of the assets, liabilities and contingent liabilities of a subsidiary, jointly controlled company or associated company at the acquisition date, in accordance with IFRS 3.
Goodwill is recorded as an asset and included in "Intangible Assets" (Note 8) in the case of a controlled company, and in "Investments in jointly controlled companies and associated companies" in the case of jointly controlled company or an associated company.
Goodwill is not amortised and is subject to impairment tests at least once a year, on a specified date, and whenever there are changes in the test's underlying assumptions at the date of the statement of financial position which may result in a possible loss of value. Any impairment loss is recorded immediately in the income statement in "Impairment losses" and is not liable to subsequent reversal.
For the purposes of impairment tests, goodwill is attributed to the cash-generating units to which it is related, which may correspond to the business segments in which the Group operates, or a lower level.
Internally generated intangible assets, including 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:
Group companies periodically carry out an impairment assessment of intangible assets inprogress. This impairment assessment is also carried out whenever events or changes in circumstances indicate that the amount at which the asset is recorded may not be recoverable. Where such indications exist, the Group calculates the recoverable value of the asset in order to determine the existence and extent of the impairment loss.
These assets are amortised by the straight-line method, in twelfths, from the beginning of the month in which they become available for use.
The amortisation rates used correspond to the following estimated useful lives:
| 2015 | 2016 | |
|---|---|---|
| (YEARS) | (YEARS) | |
| Rights of using capacities | Period of the | Period of the |
| contract | contract | |
| Telecom licences | 30 to 33 | 30 to 33 |
| Software licences | 1 to 8 | 1 to 8 |
| Customer portfolios | 5 and 6 | 5 and 6 |
| Loyalty contract | Loyalty contract | |
| Costs incurred in raising costumers loyalty contracts | period | period |
| Period of the | Period of the | |
| Content utilization rights | contract | contract |
| Other | 1 to 8 | 1 to 8 |
Group companies periodically carry out an impairment assessment of non-current assets. This impairment assessment is also carried out whenever events or changes in circumstances indicate that the amount at which the asset is recorded may not be recoverable. Where such indications exist, the Group calculates the recoverable value of the asset in order to determine the existence and extent of the impairment loss.
The recoverable value is estimated for each asset individually or, if that is not possible, assets are grouped at the lowest levels for which there are identifiable cash flows to the cashgenerating unit to which the asset belongs. Each of the Group's businesses is a cashgenerating unit, except for the assets allocated to the cinema exhibition business which are grouped into regional cash-generating units. The recoverable amount is calculated as the higher of the net sale price and the current use value. The net sale price is the amount that would be obtained from the sale of the asset in a transaction between independent and knowledgeable entities, less the costs directly attributable to the sale. The current use value is the current value of the estimated future cash flows resulting from continued use of the asset or of the cash-generating unit. Where the amount at which the asset is recorded exceeds its recoverable value, it is recognised as an impairment loss.
The reversal of impairment losses recognised in previous years is recorded when there are indications that these losses no longer exist or have decreased. The reversal of impairment losses is recognised in the statement of comprehensive income in the year in which it occurs. However, an impairment loss can only be reversed up to the amount that would be recognised (net of amortisation or depreciation) if no impairment loss had been recorded in previous years.
Financial assets are recognised in the statement of financial position of the Group on the trade or contract date, which is the date on which the Group undertakes to purchase or sell the asset.
Initially, financial assets are recognised at their fair value plus directly attributable transaction costs, except for assets at fair value through profit or loss where transaction costs are recognised immediately in profit or loss. These assets are derecognised when: (i) the Group's contractual rights to receive their cash flows expire; (ii) the Group has substantially transferred all the risks and benefits associated with their ownership; or (iii) although it retains part but not substantially all of the risks and benefits associated with their ownership, the Group has transferred control of the assets.
Financial assets and liabilities are offset and shown as a net value when, and only when, the Group has the right to offset the recognised amounts and intends to settle for the net value.
The Group classifies its financial assets into the following categories: financial investments at fair value through profit or loss, financial assets available for sale, investments held to maturity and borrowings and receivables. The classification depends on management's intention at the time of their acquisition.
This category includes non-derivative financial assets acquired with the intention of selling them in the short term. This category also includes derivatives that do not qualify for hedge accounting purposes. Gains and losses resulting from changes in the fair value of assets measured at fair value through profit or loss are recognised in results in the year in which they occur under "Losses/gains on financial assets", including the income from interest and dividends.
Financial assets available for sale are non-derivative financial assets which: (i) are designated as available for sale at the time of their initial recognition; or (ii) do not fit into the other categories of financial assets above. They are recognised as non-current assets except where there is an intention to sell them within 12 months following the date of the statement of financial position.
Shareholdings other than shares in Group companies, jointly controlled companies or associated companies are classified as financial investments available for sale and are recognised in the statement of financial position as non-current assets.
Investments are initially recognised at their acquisition cost. After initial recognition, investments available for sale are revalued at their fair value by reference to their market value at the date of the statement of financial position, without any deduction for transaction costs that may occur until their sale. In situations where investments are equity instruments not listed on regulated markets and for which it is not possible to reliably estimate their fair value, they are maintained at acquisition cost less any impairment losses.
The potential resulting capital gains and losses are recognised directly in reserves until the financial investment is sold, received or otherwise disposed of, at which time the accumulated gain or loss previously recognised in equity is included in the income statement.
Dividends on equity instruments classified as available for sale are recognised in results for the year under "Losses /(gains) on financial assets", where the right to receive the payment is established.
Investments held to maturity are classified as non-current investments except where they mature in less than 12 months from the date of the statement of financial position. This item includes investments with defined maturities which the Group has the intention and ability to keep until that date. Investments held to maturity are valued at amortised cost, less any impairment losses.
The assets classified in this category are non-derivative financial assets with fixed or determinable payments not listed on an active market.
Accounts receivable are initially recognised at fair value and subsequently valued at amortised cost, less adjustments for impairment, where applicable. Impairment losses on customers and accounts receivable are recorded where there is objective evidence that they are not recoverable under the initial terms of the transaction. The identified impairment losses are recorded in the income statement under "Provisions and adjustments", and subsequently reversed by results, when the impairment indicators reduce or cease to exist.
The amounts included in "Cash and cash equivalents" correspond to the amounts of cash, bank deposits, term deposits and other investments with maturities of less than three months which may be immediately realisable and with a negligible risk of change of value.
For the purposes of the statement of cash flows, "Cash and cash equivalents" also includes bank overdrafts included in the statement of financial position under "Borrowings" (where applicable).
Financial liabilities and equity instruments are classified according to their contractual substance irrespective of their legal form. Equity instruments are contracts that show a residual interest in the Group's assets after deducting the liabilities. The equity instruments issued by Group companies are recorded at the amount received, net of the costs incurred in their issue. Financial liabilities and equity instruments are recognised only when extinguished, i.e. when the obligation is settled, cancelled or extinguished.
Loans are stated as liabilities at their nominal value, net of the issuance costs of the loans. Financial charges, calculated in accordance with the effective rate of interest, including premiums payable, are recognised in accordance with the accruals principle.
Accounts payable are recognised initially at their fair value and subsequently at amortised cost in accordance with the effective interest rate method. Accounts payable are recognised as current liabilities unless they are expected to be settled within 12 months from the date of the statement of financial position.
See accounting policy 2.3.9.
At the date of each statement of financial position, the Group examines whether there is objective evidence that a financial asset or group of financial assets is impaired.
In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of the instrument below its cost is considered as an indicator that the instrument is impaired. If any similar evidence exists for financial assets classified as available for sale, the accumulated loss – measured as the difference between the acquisition cost and the current fair value, less any impairment of the financial asset that has already been recognised in results – is removed from equity and recognised in the income statement.
Impairment losses on equity instruments recognised in results are not reversed through the income statement.
Adjustments are made for impairment losses when there are objective indications that the Group will not receive all the amounts to which it is entitled under the original terms of the contracts. Various indicators are used to identify impairment situations, such as default analysis, financial difficulties of the debtor, including probability of insolvency of the debtor.
The adjustment for impairment losses is calculated as the difference between the recoverable value of the financial asset and its value in the statement of financial position and is stated in profit and loss for the year. The value of these assets in the statement of financial position is reduced to the recoverable amount by means of an adjustments account. When an amount receivable from customers and other debtors is considered non recoverable, it is written off using the adjustments account for impairment losses. The subsequent recovery of amounts that have been written off is recognised in profit and loss.
When there are receivables from customers or other debtors that are overdue, and these are subject to renegotiation of their terms, these are no longer regarded as overdue and become treated as new receivables.
The Group has a policy of contracting derivative financial instruments with the objective of hedging the financial risks to which it is exposed, resulting from variations in exchange rates and interest rates. The Group does not contract derivative financial instruments for speculative purposes, and the use of this type of financial instruments complies with the internal policies determined by the Board.
In relation to financial derivative instruments which, although contracted in order to provide hedging in line with the Group's risk management policies, do not meet all the requirements of IAS 39 – Financial Instruments: recognition and measurement in terms of their classification as hedge accounting or which have not been specifically assigned to a hedge relationship, the related changes in fair value are stated in the income statement for the period in which they occur.
Derivative financial instruments are recognised on the respective trade date at their fair value. Subsequently, the fair value of the derivative financial instruments is revalued on a regular basis, and the gains or losses resulting from this revaluation are recorded directly in profit and loss for the period, except in the case of hedge derivatives. Recognition of the changes in fair value of hedge derivatives depends on the nature of the risk hedged and the type of hedge used.
The possibility of designating a derivative financial instrument as a hedging instrument meets the requirements of IAS 39 - Financial instruments: recognition and measurement.
Derivative financial instruments used for hedging purposes can be classified as hedges for accounting purposes where they cumulatively meet the following conditions:
d) For cash flow hedge operations, it must be highly probable that they will occur.
Where expectations of changes in exchange rates and interest rates so warrant, the Group aims to anticipate any adverse impact through the use of derivatives. Operations that qualify as cash flow hedging instruments are stated in the statement of financial position at their fair value and, where they are considered to be effective hedges, the changes in the fair value of the instruments are initially stated as a contra entry in equity and subsequently reclassified as financial costs.
Where hedge transactions are ineffective, they are stated directly in profit and loss. Accordingly, in net terms the cash flows associated with the hedged operations are accrued at the rate applying to the contracted hedge operation.
When a hedge instrument expires or is sold, or when the hedge ceases to fulfil the criteria required for hedge accounting, the accumulated variations in the fair value of the derivative in reserves are shown in profit and loss when the operation hedged also affects profit and loss.
Inventories, which mainly include mobile phones, customer terminal equipment 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 income statement.
The net realisable value corresponds to the normal sale price less restocking costs and selling costs.
The differences between the cost and the corresponding net realisable value of inventories, where this is less than the cost, are recorded as operating costs in "Cost of goods sold".
Inventories in transit, since they are not available for consumption or sale, are separated out from other inventories and are valued at their specific acquisition cost.
Subsidies are recognised at their fair value where there is a reasonable assurance that they will be received and Group companies will meet the requirements for their award.
Operating subsidies, mainly for employee training, are recognised in the statement of comprehensive income by deduction from the corresponding costs incurred.
Investment subsidies are recognised in the statement of financial position as deferred income.
If the subsidy is considered as deferred income, it is recognised as income on a systematic and rational basis during the useful life of the asset.
Provisions are recognised where: (i) there is a present obligation arising from past events and it is likely that in settling that obligation the expenditure of internal resources will be necessary; and (ii) the amount or value of such obligation can be reasonably estimated. Where one of the above conditions is not met, the Group discloses the events as a contingent liability unless the likelihood of an outflow of funds resulting from this contingency is remote, in which case they are not disclosed.
Provisions for legal procedures taking place against the Group are made in accordance with the risk assessments carried out by the Group and by their legal advisers, based on success rates.
Provisions for restructuring are only recognised where the Group has a detailed, formal plan identifying the main features of the restructuring programme and after these facts have been reported to the entities involved.
Provisions for dismantling costs, removal of assets and restoration of the site are recognised when the assets are installed, in line with the best estimates available at that date. The amount of the provisioned liability reflects the effects of the passage of time and the corresponding financial indexing is recognised in results as a financial cost.
Obligations that result from onerous contracts are registered and measured as provisions. There is an onerous contract when the Company is an integral part of the provisions of an agreement contract, which entail costs that cannot be avoided and which exceed the economic benefits derived from the agreement.
Provisions for potential future operating losses are not covered.
Contingent liabilities are not recognised in the financial statements, unless the exception provided under IFRS 3 business combination, and are disclosed whenever there is a good chance to shed resources including economic benefits. Contingent assets are not recognised in the financial statements, being disclosed when there is a likelihood of a future influx of financial resources.
Provisions are reviewed and brought up to date at the date of the statement of financial position to reflect the best estimate at that time of the obligation concerned.
Leasing contracts are classified as: (i) finance leases, if substantially all the risks and benefits incident to ownership of the corresponding assets concerned have been transferred; or (ii) operating leases, if substantially all risks and rewards incident to ownership of those assets have not been transferred.
The classification of leases as finance or operating leases is made on the basis of substance rather than contractual form.
The assets acquired under finance leases and the corresponding liabilities are recorded using the financial method, and the assets, related accumulated depreciation and pending debts are recorded in accordance with the contractual finance plan. In addition, the interest included in the rentals and the depreciation of the tangible and intangible fixed assets are recognised in the statement of comprehensive income for the period to which they relate.
In the case of operating leases, the rentals due are recognised as costs in the income statement over the period of the leasing contract.
NOS is covered by the special tax regime for groups of companies, which covers all the companies in which it directly or indirectly owns at least 75% of the share capital and which simultaneously are resident in Portugal and subject to Corporate Income Tax (IRC).
The remaining subsidiaries not covered by the special tax regime for groups of companies are taxed individually on the basis of their respective taxable incomes and the applicable tax rates.
Income tax is stated in accordance with the IAS 12 criteria. In calculating the cost relating to income tax for the period, in addition to current tax, allowance is also made for the effect of deferred tax calculated in accordance with the liability method, taking into account the temporary differences resulting from the difference between the tax basis of assets and liabilities and their values as stated in the consolidated financial statements, and the tax losses carried forward at the date of the statement of financial position. The deferred income tax assets and liabilities were calculated on the basis of the tax legislation currently in force or of legislation already published for future application.
As stipulated in the above standard, deferred income tax assets are recognised only where there is reasonable assurance that these may be used to reduce future taxable profit, or where there are deferred income tax liabilities whose reversal is expected to occur in the same period in which the deferred income tax assets are reversed. At the end of each period an assessment is made of deferred income tax assets, and these are adjusted in line with the likelihood of their future use.
The amount of tax to be included either in current tax or in deferred tax resulting from transactions or events recognised in equity accounts is recorded directly under those items and does not affect the results for the period.
In a business combination the deferred tax benefits acquired are recognised as follow:
The benefits granted to employees under share purchase or share option incentive plans are recorded in accordance with the requirements of IFRS 2 – Share-based payments.
In accordance with IFRS 2, since it is not possible to reliably estimate the fair value of the services received from employees, their value is measured by reference to the fair value of equity instruments in accordance with their share price at the grant date.
The cost is recognised, linearly over the period in which the service is provided by employees, under the caption "Wages and salaries" in the income statement, with the corresponding increase in equity.
The accumulated cost recognised at the date of each statement of financial position up to the vesting reflects the best estimate of the number of own shares that will be vested, weighted by the tire elapse between the grant and the vesting. The impact on the income statement each year corresponds to the accumulated cost valuation between the beginning and the end of the year.
In turn, benefits granted on the basis of shares but paid in cash lead to the recognition of a liability valued at fair value at the date of the statement of financial position.
Portuguese commercial legislation requires that at least 5% of annual net profit must be appropriated to a legal reserve until it represents at least 20% of the share capital. This reserve is not distributable, except in case of liquidation, but can be used to absorb losses, after having exhausted all other reserves and to increase share capital.
Issue of shares corresponds to premiums from the issuance or capital increases. According to Portuguese law, share premiums follow the treatment given to the "Legal Reserve", that is, the values are not distributable, except in case of liquidation, but can be used to absorb losses after having exhausted all other reserves and to increase share capital.
According to IFRS 2 - "Share-based Payments", the responsibility with the medium-term incentive plans settled by delivery of own shares is recorded as credit under "Reservations for mid-term incentive plans "and such reserve is not likely to be distributed or used to absorb losses.
Hedging reserve reflects the changes in fair value of derivative financial instruments as cash flow hedges that are considered effective, and they are not likely to be distributed or be used to absorb losses.
The "own shares reserves" reflect the value of the shares acquired and follows the same legal regime as the legal reserve. Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IFRS. In addition, the increases resulting from the application of fair value through equity components, including its application through the net profit can only be distributed when the elements that originated them are sold, exercised liquidated or when the end their use, in the case of tangible fixed assets or intangible assets.
The own shares are recorded at acquisition cost as a deduction from equity. Gains or losses on the sale of own shares are recorded under "other reserves".
This item includes the results available for distribution to shareholders and earnings per fair value in financial instruments increases, financial investments and investment properties, which, in accordance with paragraph 2 of article 32 of the CSC, will only be available for distribution when the elements or rights that originated them are sold, exercised, terminated or settled.
The main types of revenue of NOS's subsidiaries are as follows:
i) Revenues of Telecommunications Services:
Cable Television, fixed broadband and fixed voice: The revenues from services provided using the fibre optic cable network result from: (a) basic channel subscription packages that can be sold in a bundle with fixed broadband/fixed voice services; (b) premium channel subscription packages and S-VOD; (c) terminal equipment rental; (d) consumption of content (VOD); (e) traffic and voice termination; (f) service activation; (g) sale of equipment; and (h) other additional services (for example: firewall, antivirus).
Satellite Television: Revenues from the satellite television service mainly result from: (a) basic and premium channel subscription packages; (b) equipment rental; (c) consumption of content (VOD); (d) service activation; and (e) sale of equipment.
Mobile broadband and voice services: Revenues from mobile broadband Internet access services and mobile voice services result mainly from monthly subscriptions and/or usage of the Internet and voice service, as well as the traffic associated with the type chosen by the client.
Revenue from telecommunications services is counted from the time at which those services are provided. Amounts that have not been invoiced for are included based on estimates. The differences between the estimated amounts and the actual amounts, which are normally imaterial, are recorded in the next financial year.
Discounts granted to clients within fidelization programs are allocated to the entire contract for which the client is fidelized. Therefore, the discount is recognised as the goods and services are made available to the client.
Profits made from selling equipment are included when the buyer takes on the risks and advantages of taking possession of goods and the value of the benefits are reasonably quantified.
Until 31 December 2014, revenue from penalties, due to the inherent uncertainties, was recorded only at the moment when it was received, and the amount was disclosed as a contingent asset (Note 39). From 1 January 2015, Revenue from penalties is recognised taking into account an estimated collectability rate taking into account the Group's collection history.
income from film showings mostly derive from cinema ticket sales and the product sales in the bars; the film showings revenue includes the revenue from ticket sales and bar sales respectively.
Interest revenue is recognised using the effective interest method, only where they generate future economic benefits for the Group and where they can be measured reliably.
Group's revenues and costs are recognised in accordance with the accruals principle, under which they are recognised as they are generated or incurred, irrespective of when they are received or paid.
The costs and revenues related to the current period and whose expenses and income will only occur in future periods are registered under "Accounts receivable – trade", "Accounts receivable – other", "Prepaid expenses", "Accrued expenses" and "Deferred income", as well as the expenses and income that have already occurred that relate to future periods, which will be recognised in each of those periods, for the corresponding amount.
The costs related to the current period and whose expenses will only occur in future periods are registered under "Accrued expenses" when it's possible to estimate with certainty the related amount, as well as the timing of the expense's materialization. If uncertainty exists related to any of these aspects, the value is classified as Provisions (Note 2.3.12).
Transactions in foreign currencies are converted into the functional currency at the exchange rate on the transactions dates. On each accounting date, outstanding balances (monetary items) are updated by applying the exchange rate prevailing on that date. The exchange rate differences in this update are recognised in the income statement for the year in which they were calculated. Exchange rate variations generated on monetary items which constitute enlargement of the investment denominated in the functional currency of the Group or of the subsidiary in question are recognised in equity. Exchange rate differences on non-monetary items are classified in "Other reserves" in equity.
The financial statements of subsidiaries denominated in foreign currencies are converted at the following exchange rates:
Exchange differences arising from the conversion into euros of the financial statements of subsidiaries denominated in foreign currencies are included in equity under "Other reserves".
At 31 December 2015 and 31 March 2016, assets and liabilities expressed in foreign currencies were converted into euros using the following exchange rates of such currencies against the euro, as published by the Bank of Portugal:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| US Dollar | 1,0887 | 1,1385 |
| Angolan Kwanza | 147,8315 | 178,6550 |
| Pound Sterling | 0,7340 | 0,7916 |
| Mozambique Metical | 49,2900 | 57,2200 |
| Canadian Dollar | 1,5116 | 1,4738 |
| Swiss Franc | 1,0835 | 1,0931 |
| Brazilian Real | 4,3117 | 4,1174 |
In the quarters ended at 31 March 2015 and 2016, the income statements of subsidiaries expressed in foreign currencies were converted to euros at the average exchange rates of the currencies of their countries of origin against the euro, which are as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Angolan Kwanza | 117.8977 | 174.4037 |
| Mozambique Metical | 37.3467 | 54.1033 |
Financial charges related to borrowings are recognised as costs in accordance with the accruals principle, except in the case of loans incurred (whether these are generic or specific) for the acquisition, construction or production of an asset that takes a substantial period of time (over one year) to be ready for use, which are capitalised in the acquisition cost of that asset.
Investment property mainly includes buildings held to generate rents rather than for use in the production or supply of goods or services, or for administrative purposes, or for sale in the ordinary course of business. These are measured initially at cost.
Subsequently, the Group uses the cost model for the valuation of investment property since use of the fair value model would not result in material differences.
An investment property is eliminated from the statement of financial position on disposal or when the investment property is taken permanently out of use and no financial benefit is expected from its disposal.
The group measure part of the financial assets, such as financial assets available for sale, and some of its non-financial assets, such as investment properties, at fair value on the date of the financial statements.
The fair value measurement assumes that the asset or liability is exchanged in an orderly transaction among market participants to sell the asset or transfer the liability at the measurement date under current market conditions. The fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability may occur:
On the main market of the assets and liabilities, or
In the absence of a primary market, it is assumed that the transaction occurs in the most advantageous market. This is what maximizes the amount that would be received to selling asset or minimizes the amount that would be paid to transfer the liability, after considering transaction costs and transport costs.
Because different entities and businesses within a single entity can have access to different markets, the main or most advantageous market for the same asset or liability can vary from one entity to another, or even between businesses within the same entity, but it is assumed that they are accessible to the Group.
The fair value measurement uses assumptions that market participants use in defining price of the asset or liability, assuming that market participants would use the asset to maximize its value.
The group uses valuation techniques appropriate to the circumstances whenever there is information to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or of which disclosure is mandatory, are rated on a fair value hierarchy, which ranks data in three levels to be used in the measurement at fair value, and detailed below:
Level 1 – Listed and unadjusted market prices, in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 - valuation techniques using inputs that aren't quoted, but which are directly or indirectly observable;
Level 3 - valuation techniques using inputs not based on observable market data, based on unobservable inputs.
The fair value measurement is classified in the same fair value hierarchy level at the lowest level of input which is significant to the measurement as a whole.
Financial assets and liabilities are offset and presented at the net amount when, and only when, the Group has the right to offset the recognised amounts and intends to settle for the net amount.
Personnel expenses are recognised when the service is rendered by employees independently of their date of payment. Here are some specificities:
a) Termination of employment. The benefits for termination of employment are due for payment when there is cessation of employment before the normal retirement date or when an employee accepts leaving voluntarily in exchange for these benefits. The Group recognizes these benefits when it can be shown to be committed to a termination of current employees according to a detailed formal plan for termination and there is no realistic possibility of withdrawal or these benefits are granted to encourage voluntary redundancy. Where the benefits of cessation of employment are due more than 12 months after the balance sheet date, they are updated to their present value.
b) Holiday, holiday allowances and bonuses. According to the labor law, employees are entitled to 22 days annual leave, as well as one month of holiday allowances, rights acquired in the year preceding payment. These liabilities of the Group are recorded when incurred, independently of the moment of payment, and are reflected under the item "Accounts payable and other".
c) Labor Compensation Fund (FCT) and the Labour Compensation Guarantee Fund (FGCT). Based on the publication of Law No 70/2013 and subsequent regulation by Order No. 294-A / 2013, entered into force on 1 October the Labor Compensation Fund schemes (FCT) and the Guarantee Fund Compensation of Labor (FGCT). In this context, companies that hire a new employee are required to deduct a percentage of the respective salary for these two new funds (0.925% to 0.075% and the FCT for FGCT), in order to ensure, in the future, the partial payment the compensation for dismissal. Considering the characteristics of each Fund, the following is considered:
-The monthly deliveries to FGCT, made by the employer are recognised as expense in the period to which they relate.
-The monthly deliveries to FCT, made by the employer are recognised as a financial asset of the entity, measured at fair value with changes recognised in the respective results.
The statement of cash flows is prepared in accordance with the direct method. The Group classifies under "Cash and cash equivalents" the assets with maturities of less than three months and for which the risk of change in value is negligible. For purposes of the statement of cash flows, the balance of cash and cash equivalents also include bank overdrafts included in the statement of financial position under "Borrowings".
The statement of cash flows is divided into operating, investment and financing activities.
Operating activities include cash received from customers and payments to suppliers, staff and others related to operating activities.
The cash flows included in investment activities include acquisitions and disposals of investments in subsidiaries and cash received and payments arising from the purchase and sale of tangible and intangible assets, amongst others.
Financing activities include cash received and payments relating to borrowings, the payment of interest and similar costs, finance leases, the purchase and sale of own shares and the payment of dividends.
Events occurring after the date of the statement of financial position which provide additional information about conditions that existed at that date are taken into account in the preparation of financial statements for the year.
Events occurring after the date of the statement of financial position which provide information on conditions that occur after that date are disclosed in the notes to the financial statements, when they are materially relevant.
The preparation of consolidated financial statements requires the Group's management to make judgments and estimates that affect the statement of financial position and the reported results. These estimates are based on the best information and knowledge about past and/or present events, and on the operations that the Company considers may it may implement in the future. However, at the date of completion of such operations, their results may differ from these estimates.
Changes to these estimates that occur after the date of approval of the consolidated financial statements will be corrected in the income statement in a prospective manner, in accordance with IAS 8 - "Accounting Policies, Changes in Accounting Estimates and Errors".
The estimates and assumptions that imply a greater risk of giving rise to a material adjustment in assets and liabilities are described below:
To determine the entities to be included in the consolidation perimeter, the Group assesses the extent to which it is exposed, or has rights, to variability in returns from its involvement with that entity and can take possession of them through the power it holds over this entity.
The decision that an entity must be consolidated by the Group requires the use of judgment, estimates and assumptions to determine the extent to which the Group is exposed to return variability and the ability to take possession of them through its power.
Other assumptions and estimates could lead to the Group's consolidation perimeter being different, with direct impact on the consolidated financial statements.
The determination of a possible impairment loss can be triggered by the occurrence of various events, such as the availability of future financing, the cost of capital or other market, economic and legal changes or changes with an adverse effect on the technological environment, many of which are beyond the Group's control.
The identification and assessment of impairment indicators, the estimation of future cash flows and the calculation of the recoverable value of assets involve a high degree of judgment by the Board.
Goodwill is subjected to impairment tests annually or whenever there are indications of a possible loss of value, in accordance with the criteria described in Note 8. The recoverable values of the cash-generating units to which goodwill is allocated are determined on the basis of the calculation of current use values. These calculations require the use of estimates by management.
The life of an asset is the period during which the Company expects that an asset will be available for use and this should be reviewed at least at the end of each financial year.
The determination of the useful lives of assets, the amortisation/depreciation method to be applied and the estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence is crucial in determining the amount of amortisation/depreciation to be recognised in the consolidated income statement each year.
These three parameters are defined using management's best estimates for the assets and businesses concerned, and taking account of the practices adopted by companies in the sectors in which the Group operates.
The capitalised costs with the audiovisual content distribution rights acquired for commercialisation in the various windows of exhibition are amortised over the period of exploration of the respective contracts. Additionally, these assets are subject to impairment tests whenever there are indications of changes in the pattern generation of future revenue underlying each contract.
The Group periodically reviews any obligations arising from past events which should be recognised or disclosed. The subjectivity involved in determining the probability and amount of internal resources required to meet obligations may give rise to significant adjustments, either due to changes in the assumptions made, or due to the future recognition of provisions previously disclosed as contingent liabilities.
Deferred income tax assets are recognised only where there is strong assurance that there will be future taxable income available to use the temporary differences or where there are deferred tax liabilities whose reversal is expected in the same period in which the deferred tax assets are reversed. The assessment of deferred income tax assets is undertaken by management at the end of each period taking account of the expected future performance of the Group.
The credit risk on the balances of accounts receivable is assessed at each reporting date, taking account of the customer's history and their risk profile. Accounts receivable are adjusted for the assessment made by management and the estimated collection risks at the date of the statement of financial position, which may differ from the effective risk incurred.
When the fair value of an asset or liabilities is calculated, on an active market, the respective market price is used. Where there is no active market, which is the case with some of the Group's financial assets and liabilities, valuation techniques generally accepted in the market, based on market assumptions, are used.
The Group uses 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.
In the quarters ended at 31 March 2015 and 2016, no material errors relating to previous years were recognised.
During the quarter ended on 31 March 2015, the changes in the consolidated perimeter were as follow:
1) On 30 March 2015, the spin-off project of NOS Comunicações, SA materialized, giving rise to the creation of a new entity, NOS Inovação, SA, to which was transferred the Product Development Department assets, which include, among others, the IRIS platform. The spinoff had no impact on the Group's consolidated financial statements.
During the quarter ended on 31 March 2016, the changes in the consolidated perimeter were as follow:
1) On 18 January 2016, the company ZON Finance BV was dissolved, which had no impact on the Group's consolidated financial statements.
The business segments are as follows:
Assets and liabilities by segment at 31 December 2015 and 31 March 2016 are shown below:
| TELCO | 31-12-2015 AUDIOVISUALS |
ELIMINATIONS | GROUP | |
|---|---|---|---|---|
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tangible assets | 1,153,518 | 14,020 | - | 1,167,538 |
| Intangible assets | 1,080,120 | 98,439 | - | 1,178,559 |
| Investments in jointly controlled companies and | ||||
| associated companies | 114,084 | 3,720 | (87,882) | 29,922 |
| Accounts receivable - other | 56,325 | 19,856 | (68,999) | 7,182 |
| Deferred income tax assets | 110,742 | 11,797 | - | 122,539 |
| Other non-current assets | 3,694 | 698 | - | 4,392 |
| TOTAL NON - CURRENT ASSETS | 2,518,483 | 148,530 | (156,881) | 2,510,132 |
| CURRENT ASSETS: | ||||
| Inventories | 29,562 | 978 | - | 30,540 |
| Account receivables | 343,052 | 58,204 | (42,284) | 358,972 |
| Accounts receivable - trade | 331,846 | 29,434 | (13,443) | 347,837 |
| Accounts receivable - other | 11,206 | 28,770 | (28,841) | 11,135 |
| Prepaid expenses | 62,561 | 2,099 | - | 64,660 |
| Other current assets | 1,774 | 534 | (66) | 2,242 |
| Cash and cash equivalents | 9,050 | 898 | - | 9,948 |
| TOTAL CURRENT ASSETS | 445,999 | 62,713 | (42,350) | 466,362 |
| TOTAL ASSETS | 2,964,482 | 211,243 | (199,231) | 2,976,494 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5,152 | 28,699 | (28,699) | 5,152 |
| Capital issued premium | 854,219 | - | - | 854,219 |
| Own shares | (10,559) | - | - | (10,559) |
| Legal reserve | 3,556 | 1,087 | (1,087) | 3,556 |
| Other reserves and accumulated earnings | 101,399 | 68,819 | (51,214) | 119,004 |
| Net income | 76,289 | 6,433 | (2) | 82,720 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,030,056 | 105,038 | (81,002) | 1,054,092 |
| Non-controlling interests | 9,372 | 21 | 37 | 9,430 |
| TOTAL EQUITY | 1,039,428 | 105,059 | (80,965) | 1,063,522 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 1,002,215 | 52,932 | (75,725) | 979,422 |
| Provisions | 133,215 | 6,269 | - | 139,484 |
| Accrued expenses | 9,475 | 65 | (70) | 9,470 |
| Other non-current liabilities | 8,628 | - | - | 8,628 |
| Deferred income tax liabilities | 13,008 | 731 | - | 13,739 |
| TOTAL NON - CURRENT LIABILITIES | 1,166,541 | 59,997 | (75,795) | 1,150,743 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 203,516 | 965 | (26,459) | 178,022 |
| Accounts payable | 348,280 | 19,043 | (11,132) | 356,191 |
| Tax payable | 20,851 | 2,511 | (66) | 23,296 |
| Accrued expenses | 157,134 | 23,551 | (4,814) | 175,871 |
| Other current liabilities | 28,732 | 117 | - | 28,849 |
| TOTAL CURRENT LIABILITIES | 758,513 | 46,187 | (42,471) | 762,229 |
| TOTAL LIABILITIES | 1,925,054 | 106,184 | (118,266) | 1,912,972 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,964,482 | 211,243 | (199,231) | 2,976,494 |
| 31-03-2016 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| ASSETS | ||||
| NON - CURRENT ASSETS: | ||||
| Tangible assets | 1,128,389 | 13,620 | - | 1,142,009 |
| Intangible assets | 1,080,650 | 98,385 | - | 1,179,035 |
| Investments in jointly controlled companies and | 90,517 | 4,083 | (87,882) | 6,718 |
| associated companies | ||||
| Accounts receivable - other | 55,763 | 20,102 | (68,996) | 6,869 |
| Deferred income tax assets | 108,702 | 11,950 | - | 120,652 |
| Other non-current assets | 3,693 | 692 | - | 4,385 |
| TOTAL NON - CURRENT ASSETS | 2,467,714 | 148,832 | (156,878) | 2,459,668 |
| CURRENT ASSETS: | ||||
| Inventories | 32,061 | 877 | - | 32,938 |
| Account receivables | 365,324 | 57,793 | (45,750) | 377,367 |
| Prepaid expenses | 81,655 | 2,043 | (131) | 83,567 |
| Other current assets | 24,889 | 628 | (158) | 25,359 |
| Cash and cash equivalents | 895 | 901 | - | 1,796 |
| TOTAL CURRENT ASSETS | 504,824 | 62,242 | (46,039) | 521,027 |
| TOTAL ASSETS | 2,972,538 | 211,074 | (202,917) | 2,980,695 |
| SHAREHOLDER'S EQUITY | ||||
| Share capital | 5,152 | 28,699 | (28,699) | 5,152 |
| Capital issued premium | 854,219 | - | - | 854,219 |
| Own shares | (6,095) | - | - | (6,095) |
| Legal reserve | 3,556 | 1,087 | (1,087) | 3,556 |
| Other reserves and accumulated earnings | 166,177 | 75,161 | (51,216) | 190,122 |
| Net income | 22,979 | 1,437 | - | 24,416 |
| EQUITY BEFORE NON - CONTROLLING INTERESTS | 1,045,988 | 106,384 | (81,002) | 1,071,370 |
| Non-controlling interests | 9,400 | 22 | 37 | 9,459 |
| TOTAL EQUITY | 1,055,388 | 106,406 | (80,965) | 1,080,829 |
| LIABILITIES | ||||
| NON - CURRENT LIABILITIES: | ||||
| Borrowings | 1,005,753 | 52,554 | (75,388) | 982,919 |
| Provisions | 134,101 | 6,484 | - | 140,585 |
| Accrued expenses | 9,302 | 65 | (70) | 9,297 |
| Other non-current liabilities | 18,848 | - | - | 18,848 |
| Deferred income tax liabilities | 12,280 | 625 | - | 12,905 |
| TOTAL NON - CURRENT LIABILITIES | 1,180,284 | 59,728 | (75,458) | 1,164,554 |
| CURRENT LIABILITIES: | ||||
| Borrowings | 188,694 | 1,048 | (30,445) | 159,297 |
| Accounts payable | 341,632 | 19,098 | (10,485) | 350,245 |
| Tax payable | 20,538 | 2,500 | (158) | 22,880 |
| Accrued expenses | 157,471 | 21,579 | (5,274) | 173,776 |
| Deferred income | 28,304 | 715 | (132) | 28,887 |
| Derivative financial instruments | 227 | - | - | 227 |
| TOTAL CURRENT LIABILITIES | 736,866 | 44,940 | (46,494) | 735,312 |
| TOTAL LIABILITIES | 1,917,150 | 104,668 | (121,952) | 1,899,866 |
| TOTAL LIABILITIES AND SHAREHOLDER´S EQUITY | 2,972,538 | 211,074 | (202,917) | 2,980,695 |
The results by segment and investments in tangible and intangible fixed assets for the quarters ended on 31 March 2015 and 2016 are shown below:
| 3M 15 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| REVENUES: | ||||
| Services rendered | 317,179 | 22,615 | (10,570) | 329,224 |
| Sales | 7,970 | 4,160 | - | 12,130 |
| Other operating revenues | 2,770 | 521 | (570) | 2,721 |
| 327,919 | 27,296 | (11,140) | 344,075 | |
| COSTS, LOSSES AND GAINS: | ||||
| Wages and salaries | 19,313 | 2,299 | (11) | 21,601 |
| Direct costs | 103,410 | 7,195 | (9,364) | 101,241 |
| Costs of products sold | 9,813 | (5) | - | 9,808 |
| Marketing and advertising | 6,216 | 1,660 | (1,318) | 6,558 |
| Support services | 24,851 | 347 | (286) | 24,912 |
| Supplies and external services | 41,123 | 4,835 | (161) | 45,797 |
| Other operating losses / (gains) | 116 | 6 | - | 122 |
| Taxes | 6,827 | 33 | - | 6,860 |
| Provisions and adjustments | (863) | 123 | - | (740) |
| 210,806 | 16,493 | (11,140) | 216,159 | |
| EBITDA | 117,113 | 10,803 | - | 127,916 |
| Depreciation, amortisation and impairment losses | 78,590 | 9,104 | - | 87,694 |
| Other losses / (gains), net | 5,959 | 131 | - | 6,090 |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 32,564 | 1,568 | - | 34,132 |
| Financial costs | 7,059 | 423 | - | 7,482 |
| Net foreign exchange losses / (gains) | 312 | 420 | - | 732 |
| Net losses / (gains) of affiliated companies | (6,886) | (458) | - | (7,343) |
| Net other financial expenses / (income) | 3,568 | 18 | - | 3,586 |
| 4,053 | 403 | - | 4,457 | |
| INCOME BEFORE TAXES | 28,511 | 1,165 | - | 29,675 |
| Income taxes | 6,231 | 224 | - | 6,455 |
| NET INCOME | 22,280 | 941 | - | 23,220 |
| CAPEX | 84,802 | 9,507 | - | 94,309 |
| EBITDA - CAPEX | 32,311 | 1,296 | - | 33,607 |
| 3M 16 | ||||
|---|---|---|---|---|
| TELCO | AUDIOVISUALS | ELIMINATIONS | GROUP | |
| REVENUES: | ||||
| Services rendered | 336,059 | 24,968 | (11,942) | 349,085 |
| Sales | 12,677 | 4,419 | (6) | 17,090 |
| Other operating revenues | 4,216 | 213 | (301) | 4,128 |
| 352,952 | 29,600 | (12,249) | 370,303 | |
| COSTS, LOSSES AND GAINS: | ||||
| Wages and salaries | 21,382 | 2,443 | - | 23,825 |
| Direct costs | 111,996 | 6,751 | (9,923) | 108,824 |
| Costs of products sold | 14,115 | 62 | (6) | 14,171 |
| Marketing and advertising | 8,319 | 1,657 | (1,652) | 8,324 |
| Support services | 23,636 | 429 | (368) | 23,697 |
| Supplies and external services | 39,686 | 5,288 | (300) | 44,674 |
| Other operating losses / (gains) | 106 | 12 | - | 118 |
| Taxes | 7,004 | 34 | - | 7,038 |
| Provisions and adjustments | 1,016 | 744 | - | 1,760 |
| 227,260 | 17,420 | (12,249) | 232,431 | |
| EBITDA | 125,692 | 12,180 | - | 137,872 |
| Depreciation, amortisation and impairment losses | 84,944 | 10,349 | - | 95,293 |
| Other losses / (gains), net | 2,375 | 53 | - | 2,428 |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 38,373 | 1,778 | - | 40,151 |
| Financial costs | 3,330 | 125 | - | 3,455 |
| Net foreign exchange losses / (gains) | (189) | 94 | - | (95) |
| Net losses / (gains) of affiliated companies | 6,729 | (364) | - | 6,365 |
| Net other financial expenses / (income) | 1,985 | 19 | - | 2,004 |
| 11,855 | (126) | - | 11,729 | |
| INCOME BEFORE TAXES | 26,518 | 1,904 | - | 28,422 |
| Income taxes | 3,501 | 467 | - | 3,968 |
| NET INCOME | 23,017 | 1,437 | - | 24,454 |
| CAPEX | 84,896 | 10,200 | - | 95,097 |
| EBITDA - CAPEX | 40,796 | 1,980 | - | 42,775 |
Transactions between segments are performed on market terms and conditions in a comparable way to transactions performed with third parties.
The accounting policies set out in IAS 39 for financial instruments were applied to the following items:
| 31-12-2015 | ||||
|---|---|---|---|---|
| OTHER FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |
| ASSETS | ||||
| Available-for-sale financial assets | - | 77 | - | 77 |
| Accounts receivable - trade (Note 14) | - | 347,837 | - | 347,837 |
| Accounts receivable - other (Note 10) | - | 13,669 | 4,648 | 18,317 |
| Cash and cash equivalents (Note 18) | - | 9,948 | - | 9,948 |
| TOTAL FINANCIAL ASSETS | - | 371,531 | 4,648 | 376,179 |
| LIABILITIES | ||||
| Borrowings (Note 21) | 1,157,444 | 1,157,444 | - | 1,157,444 |
| Derivative financial instruments (Note 17) | - | 3,416 | - | 3,416 |
| Accounts payable - trade (Note 25) | 327,485 | 327,485 | - | 327,485 |
| Accounts payable - other (Note 26) | 28,625 | 28,625 | 81 | 28,706 |
| Accrued expenses (Note 23) | 175,871 | 175,871 | - | 175,871 |
| TOTAL FINANCIAL LIABILITIES | 1,689,425 | 1,692,841 | 81 | 1,692,922 |
| 31-12-2015 | |||||
|---|---|---|---|---|---|
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE FOR-SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO MATURITY |
DERIVATIVES | ||
| ASSETS | |||||
| Available-for-sale financial assets | - | 77 | - | - | |
| Accounts receivable - trade (Note 14) | 347,837 | - | - | - | |
| Accounts receivable - other (Note 10) | 13,669 | - | - | - | |
| Cash and cash equivalents (Note 18) | 9,948 | - | - | - | |
| TOTAL FINANCIAL ASSETS | 371,454 | 77 | - | - | |
| LIABILITIES | |||||
| Borrowings (Note 21) | - | - | - | - | |
| Derivative financial instruments (Note 17) | - | - | - | 3,416 | |
| Accounts payable - trade (Note 25) | - | - | - | - | |
| Accounts payable - other (Note 26) | - | - | - | - | |
| Accrued expenses (Note 23) | - | - | - | - | |
| TOTAL FINANCIAL LIABILITIES | - | - | - | 3,416 |
| 31-03-2016 | ||||
|---|---|---|---|---|
| OTHER FINANCIAL LIABILITIES |
TOTAL FINANCIAL ASSETS AND LIABILITIES |
NON FINANCIAL ASSETS AND LIABILITIES |
TOTAL | |
| ASSETS | ||||
| Available-for-sale financial assets | - | 77 | - | 77 |
| Accounts receivable - trade (Note 14) | - | 349,564 | - | 349,564 |
| Accounts receivable - other (Note 10) | - | 28,390 | 6,282 | 34,672 |
| Cash and cash equivalents (Note 18) | - | 1,796 | - | 1,796 |
| TOTAL FINANCIAL ASSETS | - | 379,827 | 6,282 | 386,109 |
| LIABILITIES | ||||
| Borrowings (Note 21) | 1,142,217 | 1,142,217 | - | 1,142,217 |
| Derivative financial instruments (Note 17) | - | 5,608 | - | 5,608 |
| Accounts payable - trade (Note 25) | 304,613 | 304,613 | - | 304,613 |
| Accounts payable - other (Note 26) | 53,906 | 53,906 | 68 | 53,974 |
| Accrued expenses (Note 23) | 173,776 | 173,776 | - | 173,776 |
| TOTAL FINANCIAL LIABILITIES | 1,674,512 | 1,680,120 | 68 | 1,680,188 |
| 31-03-2016 | ||||||
|---|---|---|---|---|---|---|
| LOANS AND ACCOUNTS RECEIVABLE |
AVAILABLE FOR-SALE FINANCIAL ASSETS |
INVESTMENTS HELD-TO MATURITY |
DERIVATIVES | |||
| ASSETS | ||||||
| Available-for-sale financial assets | - | 77 | - | - | ||
| Accounts receivable - trade (Note 14) | 349,564 | - | - | - | ||
| Accounts receivable - other (Note 10) | 28,390 | - | - | - | ||
| Cash and cash equivalents (Note 18) | 1,796 | - | - | - | ||
| TOTAL FINANCIAL ASSETS | 379,750 | 77 | - | 379,751 | ||
| LIABILITIES | ||||||
| Borrowings (Note 21) | - | - | - | - | ||
| Derivative financial instruments (Note 17) | - | - | - | 5,608 | ||
| Accounts payable - trade (Note 25) | - | - | - | - | ||
| Accounts payable - other (Note 26) | - | - | - | - | ||
| Accrued expenses (Note 23) | - | - | - | - | ||
| TOTAL FINANCIAL LIABILITIES | - | - | - | 5,608 |
Considering its nature, the balances of the amounts to be paid and received to/from state and other public entities were considered outside the scope of IFRS 7. Also, the captions of "Prepaid expenses" and "Deferred Income" were not included in this note, as the nature of such balances are not included in the scope of IFRS 7.
The Board of Directors believes that the fair value of the breakdown of financial instruments recorded at amortised cost or registered at the present value of the payments does not differ significantly from their book value. This decision is based in the contractual terms of each financial instrument.
The Group's activity is subject to a variety of financial risks, such as market risk, liquidity risk and economical and judicial risks, which are described in the Management Report.
At 31 March 2016, the movements in this item were as follows:
| 31-12-2015 | INCREASES | TRANSFER AND OTHERS |
31-03-2016 | |
|---|---|---|---|---|
| ACQUISITION COST | ||||
| Land | 919 | - | - | 919 |
| Buildings and other constructions | 325,185 | 3,521 | 32,082 | 360,788 |
| Basic equipment | 2,466,229 | 33,969 | (75,424) | 2,424,774 |
| Transportation equipment | 14,655 | 1 | (23) | 14,633 |
| Tools and dies | 1,266 | - | 67 | 1,333 |
| Administrative equipment | 329,029 | 4,286 | (60,756) | 272,559 |
| Other tangible assets | 42,251 | 45 | (907) | 41,389 |
| Tangible assets in-progress | 43,271 | 15,017 | (15,983) | 42,305 |
| 3,222,805 | 56,839 | (120,944) | 3,158,700 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT LOSSES | ||||
| Land | 37 | - | - | 37 |
| Buildings and other constructions | 168,657 | 3,063 | 18,299 | 190,019 |
| Basic equipment | 1,534,237 | 41,172 | (44,701) | 1,530,708 |
| Transportation equipment | 6,174 | 458 | (24) | 6,608 |
| Tools and dies | 1,225 | 5 | - | 1,230 |
| Administrative equipment | 304,204 | 4,509 | (60,703) | 248,010 |
| Other tangible assets | 40,733 | 156 | (810) | 40,079 |
| 2,055,267 | 49,363 | (87,939) | 2,016,691 | |
| 1,167,538 | 7,476 | (33,005) | 1,142,009 |
At 31 March 2016, the tangible fixed assets net value is composed mainly by basic equipment, namely:
The amount of "transfer and others" corresponds mainly to the reclassification to "Non-current assets held for sale" in the amount of 24.2 million euros (Note 16) and the transfer of assets for "intangible assets", in the amount of 8.1 million euros.
The acquisition cost of the "Tangible Assets" and "Intangible Assets" held by the Group under finance lease contracts at 31 December 2015 and 31 March 2016, amounted to 225.1 million euros and 226.9 million euros, and their net book value as of those dates amounted to 127.9 million euros and 122.8 million euros, respectively.
Tangible and intangible assets include interests and other financial expenses incurred directly related to the construction of certain tangible or intangible assets in progress. At 31 March 2016, total net value of these costs amounted to 15.4 million euros (31 December 2015: 15.4 million euros). The amount capitalised in the period ended on 31 March 2016 amounted to 0.3 million euros (31 December 2015: 2.2 million euros).
At 31 March 2016, the movements in this item were as follows:
| 31-12-2015 | INCREASES | TRANSFER AND OTHERS |
31-03-2016 | |
|---|---|---|---|---|
| ACQUISITION COST | ||||
| Industrial property and other rights | 1,489,997 | 18,561 | 60,944 | 1,569,502 |
| Goodwill | 641,599 | - | - | 641,599 |
| Intangible assets in-progress | 30,589 | 19,696 | (8,363) | 41,922 |
| 2,162,185 | 38,257 | 52,581 | 2,253,023 | |
| ACCUMULATED AMORTISATION AND IMPAIRMENT LOSSES | ||||
| Industrial property and other rights | 979,470 | 45,924 | 43,969 | 1,069,363 |
| Intangible assets in-progress | 4,156 | - | 469 | 4,625 |
| 983,626 | 45,924 | 44,438 | 1,073,988 | |
| 1,178,559 | (7,667) | 8,143 | 1,179,035 |
At 31 March 2016, the item "Industrial property and other rights" includes mainly:
The amount of "transfer and others" corresponds mainly to the transfer of assets, in the amount of 8.1 million euros from "Tangible fixed assets".
Goodwill was allocated to the cash-generating units of each reportable segment, as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Telco | 564,998 | 564,998 |
| Audiovisuals | 76,601 | 76,601 |
| 641,599 | 641,599 |
In 2015 impairment tests were performed based on assessments in accordance with the discounted cash flow method, which corroborate the recoverability of the book value of the Goodwill. The amounts in these assessments are based on the historical performances and forecast growth of the businesses and their markets, incorporated in medium to long term plans approved by the Board.
These estimates are based on the following assumptions:
| AUDIOVISUALS SEGMENT | ||||
|---|---|---|---|---|
| TELCO SEGMENT |
NOS AUDIOVISUAIS |
NOS CINEMAS |
||
| Discount rate (before taxes) | 7.2% | 7.2% | 7.2% | |
| Assessment period | 5 years | 5 years | 5 years | |
| EBITDA* Growth | 4.7% | 1.0% | 2.0% | |
| Perpetuity growth rate | 1.5% | 1.5% | 1.5% |
* EBITDA = Operational result + Depreciation and amortization (CAGR – average 5 years)
In the Telco segment, the assumptions used are based on past performance, evolution of the number of customers, expected development of regulated tariffs, current market conditions and expectations of future development.
The number of years specified in the impairment tests depends on the degree of maturity of the various businesses and markets, and were determined on the basis of the most appropriate criterion for the valuation of each cash-generating unit.
Sensitivity analyses were performed on variations in discount rates of approximately 10%, from which no impairments resulted.
Sensitivity analyses were also performed for a perpetuity growth rate of 0%, from which no impairments also resulted.
At 31 March 2016 it is understood that the assumptions made in impairment tests performed in 2015 did not have significant variations, so there is no risk of any impairment.
SHARES - EQUITY Sport TV 21,617 2,862 Dreamia 2,938 3,265 Finstar 4,949 357 Mstar 230 (92) Upstar 96 106 Canal 20 TV, S.A. 17 17 East Star 36 36 Big Picture 2 Films 39 75 29,922 6,626 ASSETS 29,922 6,718 LIABILITIES (NOTE 22) - (92) 31-12-2015 31-03-2016
At 31 December 2015 and 31 March 2016, this item was composed as follows:
Movements in "Investments in jointly controlled companies and associated companies" in the quarters ended on 31 March 2015 and 2016 were as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| AS AT 1 JANUARY | 31,480 | 29,922 |
| Gains / (losses) for the year (Note 34) | 7,343 | (6,365) |
| Capital increase | - | 25,347 |
| Return of supplementary i) | - | (41,547) |
| Changes in equity ii) | (40) | (731) |
| AS AT 31 MARCH | 38,784 | 6,626 |
i) During the first quarter of 2016, Sport TV returned supplementary payments in the amount of 41.5 million euros through the delivery of cash in the amount of 25.3 million euros and the assignment of credits in the amount of 16.2 million euros.
ii) Amounts related to changes in equity of the companies registered by the equity method of consolidation are mainly related to foreign exchange impacts of the investment in 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 on 31 December 2015 and quarter ended on 31 March 2016 is as follows:
At 31 December 2015 and 31 March 2015, this item was composed as follows:
| 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
|
| Sport TV | 151,272 | 108,038 | 43,234 | 119,753 | (10,310) | 50.00% | (5,155) | |
| Dreamia | 12,821 | 6,946 | 5,875 | 3,522 | 943 | 50.00% | 472 | |
| Finstar | 173,112 | 155,814 | 17,298 | 240,445 | 26,869 | 30.00% | 8,061 | |
| Mstar | 6,246 | 5,478 | 768 | 21,319 | 835 | 30.00% | 251 | |
| Upstar | 131,772 | 131,453 | 319 | 80,667 | 100 | 30.00% | 30 | |
| Distodo* | - | - | - | - | - | 50.00% | (94) | |
| Canal 20 TV, S.A. | 36 | 1 | 35 | 56 | 37 | 50.00% | 18 | |
| East Star | 137 | 17 | 120 | - | - | 30.00% | - | |
| Big Picture 2 Films | 1,977 | 1,782 | 195 | 5,345 | 4 | 20.00% | 1 | |
| 477,373 | 409,529 | 67,844 | 471,107 | 18,478 | 3,584 |
*Company dissolved on 31 December 2015
| 2016 | |||||||
|---|---|---|---|---|---|---|---|
| ENTITY | ASSETS | LIABILITIES | EQUITY | REVENUE | NET INCOME | % HELD | GAIN/(LOSS) ATTRIBUTED TO THE GROUP |
| Sport TV | 94,519 | 88,795 | 5,724 | 33,573 | (5,109) | 50.00% | (2,555) |
| Dreamia | 13,568 | 7,038 | 6,530 | 1,537 | 655 | 50.00% | 328 |
| Finstar | 174,659 | 173,470 | 1,189 | 63,605 | (13,165) | 30.00% | (3,950) |
| Mstar | 10,222 | 10,529 | (307) | 5,834 | (683) | 30.00% | (205) |
| Upstar | 140,541 | 140,187 | 354 | 31,468 | - | 30.00% | - |
| Canal 20 TV, S.A. | 36 | 1 | 35 | - | - | 50.00% | - |
| East Star | 137 | 17 | 120 | - | - | 30.00% | - |
| Big Picture 2 Films | 3,898 | 3,522 | 376 | 3,546 | 181 | 20.00% | 36 |
| 437,580 | 423,559 | 14,021 | 139,563 | (18,121) | (6,345) |
| 31-12-2015 | 31-03-2016 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Account receivables | 7,774 | 7,182 | 22,508 | 6,869 |
| Advances of suppliers | 4,648 | - | 6,282 | - |
| 12,422 | 7,182 | 28,790 | 6,869 | |
| Impairment of other receivable | (1,287) | - | (987) | - |
| 11,135 | 7,182 | 27,803 | 6,869 |
i) The increase in the quarter ended on 31 March 2016 results of a credit assignment by Sport Tv (Note 9).
The summary of the movements in impairment of other receivables is as follows:
| 3M 15 | 3M 16 |
|---|---|
| AS AT 1 JANUARY 1,246 |
1,287 |
| Increases (Note 32) 27 |
5 |
| Others (284) |
(305) |
| AS AT 31 MARCH 989 |
987 |
| 31-12-2015 | 31-03-2016 | |||
|---|---|---|---|---|
| RECEIVABLE | PAYABLE | RECEIVABLE | PAYABLE | |
| NON CURRENT | ||||
| Debt settlement (Note 39) | 7,025 | - | 7,025 | - |
| Provision | (3,408) | - | (3,408) | - |
| 3,617 | - | 3,617 | - | |
| CURRENT | ||||
| Value-added tax | 1,812 | 17,631 | 692 | 12,679 |
| Income taxes | - | 1,355 | - | 2,736 |
| Personnel income tax witholdings | - | 2,168 | - | 5,268 |
| Social Security contributions | - | 2,003 | - | 1,973 |
| Other | 430 | 139 | 430 | 224 |
| 2,242 | 23,296 | 1,122 | 22,880 | |
| 5,859 | 23,296 | 4,739 | 22,880 | |
| At 31 December 2015 and 31 March 2016 the amounts of IRC (Corporate Income Tax) receivable and payable were composed as follows: |
||||
| 31-12-2015 | 31-03-2016 |
At 31 December 2015 and 31 March 2016, these items were composed as follows:
| Estimated current tax on income | (8,550) | (10,891) |
|---|---|---|
| Payments on account | 2,744 | 2,870 |
| Withholding income taxes | 3,760 | 4,598 |
| Other | 691 | 687 |
| (1,355) | (2,736) |
During the quarter ended on 31 March 2016, NOS and its associated companies are subject to IRC - Corporate Income Tax at the rate of 21% (16.8% 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 22.5%. Following the introduction of the austerity measures approved by Law 66-B/2012 of 31 December, this rate was raised in 3% on the amount of a company's taxable profit between 1.5 million euros and 7.5 million euros, and in 5% on the amount of a company's taxable profit exceeding 7.5 million euros. Additionally, in the measures approving the IRC reform, published by Law 2/2014 of 16 January, a new level was added to the IRC surcharge where the rate is raised in 7% over the company's taxable profit above 35 million euros.
In the calculation of taxable income, to which the above tax rates apply, amounts which are not fiscally allowable are added to and subtracted from the book results. These differences between accounting income and taxable income may be of a temporary or permanent nature.
NOS is taxed in accordance with the special taxation regime for groups of companies (RETGS), which covers the companies in which it directly or indirectly holds at least 75% of their share capital and which fulfill the requirements of Article 69 of the IRC Code.
The companies covered by the RETGS in 2016 are:
NOS Audiovisuais
NOS Cinemas
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 31 March 2016.
NOS and its associated companies have reported deferred tax relating to temporary differences between the taxable basis and the book amounts of assets and liabilities, and tax losses carried forward at the date of the statement of financial position.
The movements in deferred tax assets and liabilities for the quarters ended on 31 March 2015 and 2016 were as follows:
| DEFERRED TAXES OF THE PERIOD |
||||
|---|---|---|---|---|
| 31-12-2014 | INCOME (NOTE B) |
EQUITY (NOTE 19) |
31-03-2015 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7,442 | 869 | - | 8,311 |
| Inventories | 3,784 | (90) | - | 3,694 |
| Other provision and adjustments | 79,817 | (1,054) | - | 78,763 |
| Intragroup gains | 19,973 | 186 | - | 20,159 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
9,744 | (928) | - | 8,816 |
| Derivatives | 427 | - | 108 | 535 |
| Tax incentives | 19,297 | (2,915) | - | 16,382 |
| Tax losses carried forward | 631 | (631) | - | - |
| 141,115 | (4,563) | 108 | 136,660 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Reavaluation of fixed assets | 3 | - | - | 3 |
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
14,617 | (1,131) | - | 13,486 |
| Derivatives | 137 | - | (30) | 107 |
| Other | 2,480 | 194 | - | 2,674 |
| 17,237 | (937) | (30) | 16,270 | |
| NET DEFERRED TAX | 123,878 | (3,626) | 138 | 120,390 |
| DEFERRED TAXES OF THE PERIOD |
||||
|---|---|---|---|---|
| 31-12-2015 | INCOME (NOTE B) |
EQUITY (NOTE 19) |
31-03-2016 | |
| DEFERRED INCOME TAX ASSETS | ||||
| Doubtful accounts receivable | 7,704 | 369 | - | 8,073 |
| Inventories | 2,573 | (22) | - | 2,551 |
| Other provision and adjustments | 71,616 | (2,000) | - | 69,616 |
| Intragroup gains | 23,918 | 2,035 | - | 25,953 |
| Liabilities recorded as part of the allocation of fair value to the liabilities acquired in the merger |
8,638 | (49) | - | 8,589 |
| Derivatives | 772 | - | 504 | 1,276 |
| Tax incentives | 7,318 | (2,724) | - | 4,594 |
| 122,539 | (2,391) | 504 | 120,652 | |
| DEFERRED INCOME TAX LIABILITIES | ||||
| Reavaluation of fixed assets | 2 | - | - | 2 |
| Revaluations of assets as part of the allocation of fair value to the assets acquired in the merger |
11,156 | (762) | - | 10,394 |
| Other | 2,581 | (72) | - | 2,509 |
| 13,739 | (834) | - | 12,905 | |
| NET DEFERRED TAX | 108,800 | (1,557) | 504 | 107,747 |
At 31 March 2016, the deferred tax assets related to the other provisions and adjustments are mainly due: i) impairments and acceleration of amortisations beyond the acceptable fiscally and other adjustments in tangible and intangible assets, amounted to 56.6 million euros (2015: 62.0 million euros); ii) other provisions amounted to 13 million euros (2015: 16.8 million euros).
At 31 March 2016, the deferred tax liability related to the revaluation of assets relates mainly to the appreciation of customers' portfolio, telecommunications licenses and other assets of Optimus Group companies.
At 31 March 2016 deferred tax assets were not recognised in the amount of 1.7 million euros, corresponding mainly to tax incentives.
Deferred tax assets were recognised where it is probable that taxable profits will occur in future that may be used to absorb tax losses or deductible tax differences. This assessment was based on the business plans of the Group's companies, which are regularly revised and updated.
At 31 March 2016, the tax rate used to calculate the deferred tax assets relating to tax losses carried forward was 21% (2015: 21%). In the case of temporary differences, the rate used was 22.5% (2015: 22.5%) increased to a maximum of 6.2% (2015: 6.2%) of state surcharge when the taxation of temporary differences in the estimated period of application of the state surcharge was perceived as likely. Tax benefits, related to deductions from taxable income, are considered 100%, and in some cases, their full acceptance is conditional upon the approval of the authorities that grants such tax benefits.
Under the terms of Article 88 of the IRC Code, the Company is subject to autonomous taxation on a series of charges at the rates set out in that Article.
Under the terms of current legislation in Portugal, tax losses generated up to 2009, or in 2010 and 2011, and from 2012 to 2013 and from 2014 to 2015 onwards may be carried forward for a period of six years, four years, five years and twelve years, respectively, after their occurrence and may be deducted from taxable profits generated during that period, up to a limit of 75% of the taxable profit in 2013 and 70% of taxable profit in the following years.
In the quarters ended on 31 March 2015 and 2016, the reconciliation between the nominal and effective rates of tax was as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Income before taxes | 29,675 | 28,422 |
| Statutory tax rate | 22.5% | 22.5% |
| ESTIMATED TAX | 6,677 | 6,395 |
| Permanent differences i) | (1,429) | 1,423 |
| Differences in tax rate of group companies | (256) | (712) |
| Income tax related to previous years | 197 | (3,631) |
| Tax benefits ii) | 27 | (1,500) |
| State surcharge | 805 | 1,659 |
| Autonomous taxation | 183 | 216 |
| Provisions (Note 22) | 5 | 89 |
| Other | 246 | 29 |
| INCOME TAXES | 6,455 | 3,968 |
| Effective Income tax rate | 21.8% | 14.0% |
| Income tax | 2,829 | 2,411 |
| Deferred tax | 3,626 | 1,557 |
| 6,455 | 3,968 |
i) At 31 March 2015 and 2016 the permanent differences were composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Equity method (Note 35) | (7,343) | 6,365 |
| Other | 993 | (42) |
| (6,350) | 6,323 | |
| 22.5% | 22.5% | |
| (1,429) | 1,423 |
ii) This item corresponds to the amount of deferred taxes and the use of tax benefits for which there was no record of deferred taxes: SIFIDE (Business Research and Development Tax Incentives System), a tax benefit introduced by Law 40/2005 of 3 August, of the RFAI (Investment Tax Incentive Regime) introduced by Law 10/2009 of 10 March and of the CFEI (Tax Credit for Extraordinary Investment) introduced by Law 49/2013 of 16 July. Under the terms of the IRC (Corporate Income Tax) Code, the tax paid may not be less than 90% of the amount which would result if the Company did not benefit from tax benefits. Therefore, this amount corresponds to that difference, given that the amount is recorded in the controlling company under the Special Taxation Regime for Groups of Companies, and the tax benefits are recorded in the controlled companies.
At 31 December 2015 and 31 March 2016, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| INVENTORIES | ||
| Telco | 37,985 | 40,380 |
| Audiovisuals | 2,195 | 2,119 |
| 40,180 | 42,499 | |
| IMPAIRMENT OF ADJUSTMENTS | ||
| Telco | (8,423) | (8,319) |
| Audiovisuals | (1,217) | (1,242) |
| (9,640) | (9,561) | |
| 30,540 | 32,938 |
The movements occurred in impairment adjustments were as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| AS AT 1 JANUARY | 13,924 | 9,640 |
| Increase and decrease - Cost of products sold (Note 30) | (339) | (101) |
| Others | 3 | 22 |
| AS AT 31 MARCH | 13,588 | 9,561 |
At 31 December 2015 and 31 March 2016, this item was as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Trade receivables | 285,170 | 279,676 |
| Doubtful accounts for trade receivables | 194,497 | 200,860 |
| Unbilled revenues | 62,667 | 69,888 |
| 542,334 | 550,424 | |
| Impairment of trade receivable | (194,497) | (200,860) |
| 347,837 | 349,564 |
Unbilled revenues mainly correspond to revenues related to services rendered that will only be invoiced in the month following the provision of the service.
The movements occurred in impairment adjustments were as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| AS AT 1 JANUARY | 175,789 | 194,497 |
| Increases and decreases (Note 32) | 210 | 3,538 |
| Penalties - i) | 5,126 | 3,545 |
| Receivables written off and others | (694) | (720) |
| AS AT 31 MARCH | 180,431 | 200,860 |
i) Penalties correspond to the estimated amount of uncollectible invoiced penalties recognised in the period, deducted from revenue, as described in note 39.6.
At 31 December 2015 and 31 March 2016, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Costs of litigation procedure activity i) | 31,013 | 29,809 |
| Discounts ii) | 19,228 | 20,185 |
| Programming costs | 2,187 | 14,904 |
| Rentals | 3,275 | 3,985 |
| Insurance | 2,655 | 2,254 |
| Others | 6,302 | 12,429 |
| 64,660 | 83,567 |
i) The value of litigation costs corresponds to the amount paid by the entry of court proceedings related to clients in litigation and the total estimated liability related to the court proceedings, which amount is recognised linearly in the income statement while the proceedings run.
ii) Discounts correspond mainly to discounts to new customers under loyalty programs. These discounts are allocated to the whole loyatly period of the contract. The discounts are recognised as the goods and services are provide to the customer.
During the year ended on 31 December 2015 this item corresponds to two vacant premises which were sold, a building and a movie theatre.
On 31 March 2016, this item corresponds to NOS Comunicações S.A. FTTH network assets, located in the metropolitan areas of Lisbon and Porto, on which Vodafone has exercised its purchase option, on February 25, 2016, as per the statement of non-opposition decision by the Competition Authority to the operation of merger between ZON and Optimus of 26 August 2013. The amount corresponds to the book value, net of amortization, reclassified from tangible fixed assets (Note 7).
Exchange rate risk is mainly related to exposure resulting from payments made to certain producers of audiovisual content and equipment for the Pay TV, broadband and voice business. Business transactions between the Group and these suppliers are mainly denominated in US dollars.
Depending on the balance of accounts payable resulting from transactions denominated in a currency different from the Group's operating currency, the NOS Group may contract financial instruments, namely short-term foreign currency forwards, in order to hedge the risk associated with these balances. At the date of the statement of financial position there were foreign currency forwards open for 7,108 thousand Dollars (2015: 4,375 thousand Dollars), the fair value amounts to a loss of about 227 thousand euros (2015: loss of about 47 thousand euros) which is stated in liabilities as a counterpart of shareholder's equity.
At 31 March 2016, NOS had contracted four interest rate swaps totaling of 375 million euros (2015: 375 million euros), whose maturities expire in 2017 (two swaps in the amount of 125 million euros) and 2019 (two swaps in the amount of 250 million euros). The fair value of interest rate swaps, in the negative amount of 5.4 million euros (2015: negative amount of 3.4 million euros) was recorded in liabilities, against shareholder's equity.
| 31-12-2015 | |||
|---|---|---|---|
| LIABILITIES | |||
| NOTIONAL | CURRENT | NON CURRENT | |
| Interest rate swaps | 375,000 | - | 3,369 |
| Exchange rate forward | 4,375 | 47 | - |
| 379,375 | 47 | 3,369 | |
| 31-03-2016 | |||
| LIABILITIES | |||
| NOTIONAL | CURRENT | NON CURRENT | |
| Interest rate swaps | 375,000 | - | 5,381 |
| Exchange rate forward | 7,108 | 227 | - |
| 382,108 | 227 | 5,381 |
Movements during the quarters ended on 31 March 2015 and 2016 were as follows:
| 31-12-2014 | RESULT | EQUITY | 31-03-2015 | |
|---|---|---|---|---|
| Fair value interest rate swaps | (1,899) | - | (479) | (2,378) |
| Fair value exchange rate forward | 368 | - | 11 | 379 |
| CASH FLOW HEDGE DERIVATIVES | (1,531) | - | (468) | (1,999) |
| Deferred income tax liabilities | (137) | 30 | (107) | |
| Deferred income tax assets | 427 | 108 | 535 | |
| DEFERRED INCOME TAX | 290 | - | 138 | 428 |
| (1,241) | - | (330) | (1,571) | |
| 31-12-2015 | RESULT | EQUITY | 31-03-2016 | |
| Fair value interest rate swaps | (3,369) | - | (2,012) | (5,381) |
| Fair value exchange rate forward | (47) | (180) | (227) | |
| CASH FLOW HEDGE DERIVATIVES | (3,416) | - | (2,192) | (5,608) |
| Deferred income tax liabilities | - | - | ||
| Deferred income tax assets | 772 | 504 | 1,276 | |
| DEFERRED INCOME TAX | 772 | - | 504 | 1,276 |
| (2,644) | - | (1,688) | (4,332) |
At 31 December 2015 and 31 March 2015, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Cash | 223 | 618 |
| Deposits | 9,190 | 719 |
| Other deposits i) | 535 | 459 |
| 9,948 | 1,796 |
i) At 31 December 2015 and 31 March 2016, term deposits have short-term maturities and bear interest at normal market rates.
At 31 December 2015 and 31 March 2016 the share capital of NOS was 5,151,613.80 euros, represented by 515,161,380 shares registered book-entry shares, with a nominal value of 1euro cent per share.
The main shareholders as of 31 December 2015 and 31 March 2016 are:
| 31-12-2015 | 31-03-2016 | |||
|---|---|---|---|---|
| NUMBER OF SHARES |
% SHARE CAPITAL |
NUMBER OF SHARES |
% SHARE CAPITAL |
|
| ZOPT, SGPS, SA (1) | 257,632,005 | 50.01% | 257,632,005 | 50.01% |
| Banco BPI, SA (2) | 17,516,365 | 3.40% | 17,516,365 | 3.40% |
| Sonaecom, SGPS, SA (3) | 11,012,532 | 2.14% | 11,012,532 | 2.14% |
| Norges Bank | 10,891,068 | 2.11% | 10,891,068 | 2.11% |
| Blackrock, Inc | 10,349,515 | 2.01% | 10,349,515 | 2.01% |
| TOTAL | 307,401,485 | 59.67% | 307,401,485 | 59.67% |
(1) In accordance with subparagraphs 1.b) and 1.c) of Article 20 and Article 21 of the Security Code, a qualified shareholding of 52.15% of the share capital and voting rights of company, calculated in accordance with Article 20.º of the Securities Code, is attributable to ZOPT, Sonaecom and the following entities:
On 27 August 2013, and following the completion of the merger between ZON and Optimus SGPS, the Company's share capital was increased by 856,404,278 euros, corresponding to the total number of issued shares (206,064,552 shares), based on the closing market price of 27 August 2013. The capital increase is detailed as follows:
i) share capital in the amount of 2,060,646 euros;
ii) premium for issue of shares in the amount of 854,343,632 euros.
Additionally, the premium for issue of shares was deducted in the amount of 125 thousand euros related to costs with the respective capital increase.
The capital issued premium is subject to the same rules as for legal reserves and can only be used:
Company law regarding own shares requires the establishment of a non-distributable reserve of an amount equal to the purchase price of such shares, which becomes frozen until the shares are disposed of or distributed. In addition, the applicable accounting rules determine that gains or losses on the disposal of own shares are stated in reserves.
At 31 March 2016 there were 962,655 own shares, representing 0.1869% of the share capital (31 December 2015: 1,666,482 own shares, representing 0.3235% of the share capital).
Movements in the quarters ended on 31 March 2015 and 2016 were as follows:
| QUANTITY | VALUE | |
|---|---|---|
| BALANCE AS AT 1 JANUARY 2015 | 2,496,767 | 11,791 |
| Distribution of own shares - share incentive scheme | (1,880,282) | (8,880) |
| Distribution of own shares - other remunerations | (1,246) | (6) |
| BALANCE AS AT 31 MARCH 2015 | 615,239 | 2,905 |
| BALANCE AS AT 1 JANUARY 2016 | 1,666,482 | 10,559 |
| Acquisition of own shares | 1,214,367 | 7,729 |
| Distribution of own shares - share incentive scheme | (1,489,287) | (9,475) |
| Distribution of own shares - other remunerations | (428,907) | (2,718) |
| BALANCE AS AT 31 MARCH 2015 | 962,655 | 6,095 |
Company law and NOS's Articles of Association establish that at least 5% of the Company's annual net profit must be used to build up the legal reserve until it corresponds to 20% of the share capital. This reserve cannot be distributed except in the event of liquidation of the company, but it may be used to absorb losses after all other reserves have been exhausted, or for incorporation in the share capital.
Under Portuguese law, the amount of distributable reserves is determined according to the individual financial statements of the company prepared in accordance with IAS / IFRS. Thus, on 31 March 2016, NOS had reserves which by their nature are considered distributable in the amount of approximately 111 million euros.
The movements of the non-controlling interests occurred during the quartes ended on 31 March 2015 and 2016 and the results attributable to non-controlling interests for the period are as follows:
| 31-12-2014 | ATTRIBUTABLE PROFITS |
OTHER | 31-03-2015 | |
|---|---|---|---|---|
| NOS Madeira Comunicações | 6,978 | 8 | (9) | 6,977 |
| NOS Açores Comunicações | 2,796 | (31) | (3) | 2,762 |
| Lusomundo SII | 6 | - | - | 6 |
| Empracine | 1 | - | - | 1 |
| Lusomundo Imobiliária 2, SA | 37 | - | - | 37 |
| 9,818 | (23) | (12) | 9,783 | |
| 31-12-2015 | ATTRIBUTABLE PROFITS |
OTHER | 31-03-2016 | |
| NOS Madeira Comunicações | 6,739 | 48 | (8) | 6,779 |
| NOS Açores Comunicações | 2,632 | (10) | (1) | 2,621 |
| Lusomundo SII | 23 | - | - | 23 |
| Empracine | - | - | - | - |
| Lusomundo Imobiliária 2, SA | 36 | - | - | 36 |
9,430 38 (9) 9,459
At 31 December 2015 and 31 March 2016, the composition of borrowings was as follows:
| 31-12-2015 | 31-03-2016 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| LOANS - NOMINAL VALUE | 141,004 | 865,966 | 124,175 | 876,218 |
| Debenture loan | - | 525,000 | - | 525,000 |
| Commercial paper | 100,000 | 235,000 | 100,000 | 245,000 |
| Foreign loans | 1,708 | 105,966 | 687 | 106,218 |
| Bank overdrafts | 39,296 | - | 23,488 | - |
| LOANS - ACCRUALS AND DEFERRALS | 709 | (3,402) | (282) | (3,155) |
| FINANCIAL LEASES | 36,309 | 116,858 | 35,404 | 109,856 |
| Long Term Contracts | 18,275 | 80,847 | 15,798 | 78,113 |
| Other | 18,034 | 36,011 | 19,606 | 31,743 |
| 178,022 | 979,422 | 159,297 | 982,919 |
During the year ended on 31 March 2016, the average cost of debt of the used lines was approximately 2.27% (2015: 2.85%).
At 31 December 2015 and 31 March 2016, the Company has the following bonds issued, totaling 525 million euros, with maturity after 31 December 2016:
At 31 March 2016, an amount of 2,313 thousand euros, corresponding to interest and commissions, was deducted from this amount and recorded in the item "Loans - accruals and deferrals".
The Company has borrowings of 345 million euros, from a total contracted amount of 605 million euros, in the form of commercial paper contracted with eight banks, corresponding to ten programs, earning interest at market rates. Commercial paper programmes with maturities over 1 year totaling 245 million euros are classified as non-current, since the Company has the ability to unilaterally renew the current issues on or before the programmes' maturity dates and because they are underwritten by the organizer. This amount, although it has current maturity, was classified as non-current for purposes of presentation in the statement of financial position.
At 31 March 2016, an amount of 1.124 thousand euros, corresponding to interest and commissions, was deducted to this amount and recorded in the item "Loans - accruals and deferrals".
In November 2013, NOS signed a Finance Contract with the European Investment Bank in the amount of 110 million euros to support the development of the mobile broadband network in Portugal. In June 2014 the total amount of funds was used. This contract matures in a maximum period of 8 years from the use of the funds. At 31 March 2016, an amount of 3,782 thousand euros was deducted from this amount, corresponding to the benefit associated with the fact that the loan is at a subsidized rate.
On 31 December 2015 and 31 March 2016, the long-term contracts are mainly related to contracts signed by NOS SA for the acquisition of exclusive satellite use, to the contracts signed by NOS SA and NOS Technology related to the purchase of rights to use the distribution network and the contract signed by NOS Cinemas regarding the acquisition of digital equipment.
These medium and long term agreements under which the group has the right to use a specific asset are recorded as finance leases in accordance with IAS 17 - Leases and IFRIC 4 - "Determining whether an arrangement contains a lease".
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Until 1 year | 43,225 | 41,775 |
| Between 1 and 5 years | 97,275 | 91,670 |
| Over 5 years | 40,119 | 37,761 |
| 180,619 | 171,206 | |
| Future financial costs | (27,452) | (25,946) |
| PRESENT VALUE OF FINANCE LEASE LIABILITIES | 153,167 | 145,260 |
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Until 1 year | 36,309 | 35,404 |
| Between 1 and 5 years | 80,802 | 75,718 |
| Over 5 years | 36,056 | 34,138 |
| 153,167 | 145,260 |
All bank borrowings contracted (with the exception of EIB loan of 110 million euros, bond loan in the amount 50 million euros and finance leases) are negotiated at variable short term interest rates and their book value is therefore broadly similar to their fair value.
The maturities of the loans obtained are as follows:
| 31-12-2015 | 31-03-2016 | |||||
|---|---|---|---|---|---|---|
| UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | UNTIL 1 YEAR | BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS | |
| Debenture loan | 1,602 | 371,917 | 149,799 | 765 | 372,083 | 149,839 |
| Commercial paper | 99,107 | 234,882 | - | 98,953 | 244,923 | - |
| Foreign loans | 1,708 | 69,635 | 36,331 | 687 | 69,803 | 36,415 |
| Bank overdrafts | 39,296 | - | - | 23,488 | - | - |
| Financial Leases | 36,309 | 80,802 | 36,056 | 35,404 | 75,718 | 34,138 |
| 178,022 | 757,236 | 222,186 | 159,297 | 762,527 | 220,392 |
At 31 December 2015 and 31 March 2016, the provisions were as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Litigation and other - i) | 61,042 | 59,456 |
| Financial investments - ii) | - | 92 |
| Dismantling and removal of assets - iii) | 24,204 | 27,631 |
| Contingent liabilities - iv) | 34,673 | 34,673 |
| Contingencies - other - v) | 19,565 | 18,733 |
| 139,484 | 140,585 |
Madeira/Porto Santo undersea cable and v) the use of two fiber optic circuits. NOS contested the action, in particular the prices concerned, the services and the legitimacy of MEO with regard to the ducts. A decision was handed down in late July 2013, favorable to NOS Madeira. As a consequence of this decision, MEO appealed to the Lisbon Court of Appeal. In June 2015, the decision was handed down which fully acquitted NOS Madeira relative to MID and confirmed the lower court decision.This decision has been appealed by MEO to the Federal Court of Justice, which decided not to meet part of the appeal of the object brought by MEO and, as the remainder of the action (restricted to the MID service), judged partially founded, condemning NOS Madeira to pay MEO the amount of 160 thousand euros, plus default interest.
In 2013, ANACOM deliberated to approve the final results of the CLSU audit presented by PTC, relative to the period from 2007 to 2009, in a total amount of 66.8 million euros, a decision which was contested by NOS. In January 2015, ANACOM issued the settlement notes in the amount of 18.6 million euros, which were contested by NOS and for which a bail was presented by NOS SGPS (Note 38) to avoid Tax Execution Proceedings.
In 2014, ANACOM deliberated to approve the final results of the CLSU audit by PTC, relative to the period from 2010 to 2011, in a total amount of 47 million euros, a decision also contested by NOS. In February 2016, ANACOM issued the settlement notes in the amount of 13 million euros, which were contested.
In 2015, ANACOM deliberated to approve the final results of the audit to CLSU presented by PTC for the year 2012, in the amount of 20 million euros, decision which was contested by NOS.
In the same year of 2015, ANACOM deliberated on the approval of the results of the audit to CLSU presented by PTC for the year 2013, in the amount of 20 million euros. This decision will timely be contested by NOS.
Is expected that the PTC will submit to ANACOM calculations of CLSU incurred in the period between January and June 2014.
It is the opinion of the Board of Directors of NOS that these extraordinary contributions to SU (not designated through a tender procedure) flagrantly violate the Directive of Universal Service. Moreover, considering the existing legal framework since NOS began its activity, the request of payment of the extraordinary contribution violates the principle of the protection of confidence, recognised on a legal and constitutional level in Portuguese domestic law. For these reasons, NOS will continue judicially challenge the liquidation of each extraordinary contributions, once the Board of Directors is convinced it will be successful in all challenges, both future and already undertaken;
| 31-12-2014 | INCREASES | DECREASES | OTHER | 31-03-2015 | |
|---|---|---|---|---|---|
| Litigation and other | 50,129 | 3,979 | (1,744) | 2,226 | 54,591 |
| Financial investments | 64 | 234 | - | - | 298 |
| Dismantling and removal of assets | 18,131 | - | (105) | 2,690 | 20,716 |
| Contingent liabilities | 34,673 | - | - | - | 34,673 |
| Contingencies - other | 24,224 | 11 | (27) | (2,640) | 21,567 |
| 127,221 | 4,224 | (1,876) | 2,276 | 131,845 |
During the quarter ended on 31 March 2015, movements in provisions were as follows:
During the period ended on 31 March 2015, increases of provisions mainly refer to the update of the value of contingencies and respective interest claims. The decreases in provisions include the reduction of the fine, in the amount of 500 thousand euros, of the proceeding brought by CNPD, abovementioned.
The amount recorded in the item "Litigation and other" under the heading "Other" in the amount of 2.2 million euros corresponds mainly to a reclassification from deferred tax assets, since they were reducing the deferred tax assets of tax losses.
The movement recorded in "Other" in the amount of 2.7 million under the heading "Dismantling and removal of assets", was recorded by counterpart of "Tangible Assets" and results mainly from the increase in provisions for dismantling of assets result of the change of the rate used in the update for the present value of the liability.
During the quarter ended on 31 March 2016, movements in provisions were as follows:
| 31-12-2015 | INCREASES | DECREASES | OTHER | 31-03-2016 | |
|---|---|---|---|---|---|
| Litigation and other | 61,042 | 465 | (2,051) | - | 59,456 |
| Financial investments | - | 92 | - | - | 92 |
| Dismantling and removal of assets | 24,204 | 96 | (38) | 3,369 | 27,631 |
| Contingent liabilities | 34,673 | - | - | - | 34,673 |
| Contingencies - other | 19,565 | 312 | - | (1,144) | 18,733 |
| 139,484 | 965 | (2,089) | 2,225 | 140,585 |
During the quarter ended on 31 March 2016, increases of provisions mainly refer to the update of the value of contingencies and respective interest claims, processes for which there was already provision.
The movement recorded in "Other" in the amount of 3.4 million under "Dismantling and removal of assets", was recorded by counterpart of "Tangible Assets" and results mainly from the increase in provisions for dismantling of assets result of the change of the rate used in the update for the present value of the liability.
The net movements for the quarters ended on 31 March 2015 and 2016 reflected in the income statement under "Provisions and adjustments" were as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Provisions and adjustments (Note 32) | (976) | (1,790) |
| Financial investments (Note 9) | 234 | 92 |
| Other losses / (gains) non-recurrent | 2,626 | 308 |
| Interests - dismantling | (105) | 58 |
| Other interests | 551 | 119 |
| Income tax (Note 12) | 5 | 89 |
| Other | 13 | - |
| INCREASES AND DECREASES IN PROVISIONS | 2,348 | (1,124) |
At 31 December 2015 and 31 March 2016, these items were composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| NON CURRENT | ||
| Contractual obligations i) | 9,470 | 9,297 |
| 9,470 | 9,297 | |
| CURRENT | ||
| Invoices to be issued by operators ii) | 43,309 | 48,359 |
| Vacation pay and bonuses | 26,236 | 21,196 |
| Investments in tangible and intangible assets | 16,808 | 15,061 |
| Specialized works | 16,272 | 14,888 |
| Rights of movies and contents | 16,106 | 14,882 |
| Advertising | 8,107 | 9,332 |
| Costs of litigation procedure activity | 10,452 | 8,789 |
| Comissions | 6,376 | 6,371 |
| Rentals | 4,608 | 6,325 |
| Programming services | 10,377 | 5,113 |
| Energy and water | 3,528 | 3,283 |
| Maintenance and repair | 1,715 | 2,299 |
| Other accrued expenses | 11,977 | 17,877 |
| 175,871 | 173,776 |
i) under the fair value allocation process of to the assets and liabilities of the Optimus group, contractual obligations were identified relating to long-term contracts whose prices are different from market prices. This amount relates to the medium and long-term portion of the fair value adjustment of these contracts.
ii) invoices to be billed by operators, mainly international operators, regarding interconnection costs related with international traffic and roaming services.
At 31 December 2015 and 31 March 2016, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT | CURRENT | NON CURRENT | |
| Advance billing i) | 28,467 | - | 28,552 | - |
| Investment subsidy ii) | 335 | 5,259 | 335 | 5,124 |
| 28,802 | 5,259 | 28,887 | 5,124 |
i) This item relates mainly to the billing of Pay TV services of April 2016 and amounts received from NOS Comunicações' customers, related with the recharges of mobile phones and purchase of telecommunications minutes as of yet unused.
ii) Deferred income related to the implicit subsidy when the EIB loans were obtained at interest rates below market value (Note 21).
At 31 December 2015 and 31 March 2016, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Suppliers current account | 322,319 | 298,148 |
| Invoices in reception and conference | 5,166 | 6,465 |
| 327,485 | 304,613 |
These balances include amounts advanced to suppliers by banks.
At 31 December 2015 and 31 March 2016, this item was composed as follows:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| NON CURRENT | ||
| Assignment of receivables without recourse i) | - | 8,343 |
| - | 8,343 | |
| CURRENT | ||
| Fixed assets suppliers | 27,617 | 34,093 |
| Assignment of receivables without recourse i) | - | 9,757 |
| Advances from customers | 81 | 68 |
| Other | 1,008 | 1,714 |
| 28,706 | 45,632 | |
| 28,706 | 53,975 |
i) In the quarter ended 31 March 2016, NOS Comunicações, SA materialized a credit assignment transaction in the amount of 18.1 million euros, which it ceded future credits to be generated by a portfolio of Corporate customers. This operation was coordinated by Banco Comercial Português. This does not imply any change in the accounting treatment of the receivables or in the relationship with their customers.
Consolidated operating revenues for the quarters ended on 31 March 2015 and 2016 are distributed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| SERVICES RENDERED: | ||
| Telco i) | 311,748 | 330,797 |
| Audiovisuals and cinema exhibition ii) | 17,476 | 18,288 |
| 329,224 | 349,085 | |
| SALES: | ||
| Telco iii) | 7,970 | 12,671 |
| Audiovisuals and cinema exhibition iv) | 4,160 | 4,419 |
| 12,130 | 17,090 | |
| OTHER OPERATING REVENUES: | ||
| Telco | 2,540 | 3,934 |
| Audiovisuals and cinema exhibition | 181 | 194 |
| 2,721 | 4,128 | |
| 344,075 | 370,303 |
These operating revenues are shown net of inter-company eliminations.
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Remuneration | 16,800 | 18,746 |
| Social taxes | 4,182 | 4,255 |
| Social benefits | 314 | 320 |
| Other | 305 | 504 |
| 21,601 | 23,825 |
In the quarters ended on 31 December 2015 and 2016, the average number of employees of the companies included in the consolidation was 2,474 and 2,507, respectively. At 31 March 2016, the number of employees of the companies included in the consolidation was 2,527 employees.
The costs of compensations paid to employees, since they are non-recurring costs, are recorded in the item "restructuring costs".
Additionally, during the quarter ended on 31 March 2015 2.3 million euros related to costs of bonuses paid to employees (Executive Commission not included) were recorded in the item "restructuring costs", since they are non-recurring costs. These bonuses recognise the excellent performance of all employees in the merger of NOS.
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Exhibition costs | 40,163 | 42,559 |
| Traffic costs | 45,234 | 48,663 |
| Capacity costs | 11,650 | 12,670 |
| Shared advertising revenues | 3,149 | 3,242 |
| Other | 1,045 | 1,690 |
| 101,241 | 108,824 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Costs of products sold | 10,147 | 14,272 |
| Inventories impairment | (339) | (101) |
| 9,808 | 14,171 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| SUPPORT SERVICES: | ||
| Call centers and customer support | 8,743 | 8,683 |
| Information systems | 4,463 | 4,928 |
| Administrative support and other | 11,706 | 10,086 |
| 24,912 | 23,697 | |
| SUPPLIES AND EXTERNAL SERVICES: | ||
| Maintenance and repair | 10,605 | 10,501 |
| Rentals | 10,423 | 11,029 |
| Electricity | 5,360 | 5,228 |
| Commissions | 4,852 | 3,147 |
| Professional services | 3,176 | 2,921 |
| Communications | 1,990 | 1,994 |
| Installation and removal of terminal equipment | 2,079 | 1,927 |
| Other supplies and external services | 7,312 | 7,927 |
| 45,797 | 44,674 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| Provisions (Note 22) | (976) | (1,790) |
| Impairment of account receivables - trade (Note 14) | 210 | 3,538 |
| Impairment of account receivables - other (Note 10) | 27 | 5 |
| Debts recovery | (1) | 7 |
| (740) | 1,760 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| TANGIBLE ASSETS | ||
| Buildings and other constructions | 2,601 | 3,063 |
| Basic equipment | 41,967 | 41,172 |
| Transportation equipment | 303 | 458 |
| Tools and dies | 2 | 5 |
| Administrative equipment | 7,282 | 4,509 |
| Other tangible assets | 314 | 156 |
| 52,469 | 49,363 | |
| INTANGIBLE ASSETS | ||
| Industrial property and other rights | 35,213 | 45,924 |
| 35,213 | 45,924 | |
| INVESTIMENT PROPERTY | ||
| Investment property | 12 | 6 |
| 12 | 6 | |
| 87,694 | 95,293 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| EQUITY METHOD (NOTE 9) | ||
| Sport TV | (353) | 2,555 |
| Dreamia | (451) | (328) |
| Finstar | (6,586) | 3,852 |
| Mstar | (308) | 332 |
| Upstar | 363 | (10) |
| Others | (8) | (36) |
| (7,343) | 6,365 |
In the quarters ended on 31 March 2015 and 2016, this item was composed as follows:
| 3M 15 | 3M 16 | |
|---|---|---|
| FINANCING COSTS: | ||
| INTEREST EXPENSE: | ||
| Borrowings | 6,683 | 4,195 |
| Finance leases | 1,657 | 1,386 |
| Derivatives | 257 | 431 |
| Other | 695 | 299 |
| 9,292 | 6,311 | |
| INTEREST EARNED | (1,810) | (2,856) |
| 7,482 | 3,455 | |
| NET OTHER FINANCIAL EXPENSES / (INCOME): | ||
| Comissions and guarantees | 2,564 | 1,383 |
| Other | 1,022 | 621 |
| 3,586 | 2,004 |
Interest earned mainly corresponds to default interests charged to customers.
Earnings per share for the years ended on 31 March 2015 and 2016, were calculated as follow:
| 3M 15 | 3M 16 | |
|---|---|---|
| Consolidated net income attributable to shareholders | 23,243 | 24,416 |
| Number of ordinary shares outstanding during the period (weighted average) |
514,333,172 | 507,748,075 |
| Basic earnings per share - euros | 0.05 | 0.05 |
| Diluted earnings per share - euros | 0.05 | 0.05 |
In the above periods there were no diluting effects on net earnings per share, so the diluted earnings per share are equal to the basic earnings per share.
At 31 December 2014 and 2015, the Group had furnished sureties, guarantees and comfort letters in favor of third parties corresponding to the following situations:
| 31-12-2015 | 31-03-2016 | |
|---|---|---|
| Financial instituitions i) | 110,264 | 110,264 |
| Tax authorities ii) | 12,161 | 13,116 |
| Other iii) | 13,446 | 13,743 |
| 135,871 | 137,123 |
In connection with the finance obtained by Upstar from NOVO BANCO, totaling 20 million euros, NOS signed a promissory note, proportional to the participation held, of 30% of the loan, effective on 31 December 2015.
Additionally, during 2014, in connection with a contract between Upstar and a supplier of TV contents, NOS signed a personal guarantee, in the form of a partial endorsement, proportional to NOS's shareholder position of 30%, as a counter guarantee of a guarantee by Novo Banco in the amount of 30 million dollars, to pledge the fulfillment of the contract's obligations.
During 2015, NOS issued a comfort letter to Caixa Geral de Depósitos as part of an issue of a bank guarantee to Sport TV amounting to 23.1 million euros.
During the first quarter of 2015 and 2016 and following the settlement note to CLSU 2007-2009 and 2010-2011, NOS constituted guarantees in favor of the Universal Service Compensation Fund in the amount of 23.6 million euros and 16.7 million euros, respectively, in order to prevent the introduction of tax enforcement proceedings in order to enforce recovery of the amounts paid (Note 23).
During the first quarter of 2016, NOS constituted guarantees on behalf of Sport TV, to the The Football Association League Limited in the amount of 29.1 million euros.
In addition to the guarantees required by the Tax Authorities, sureties were set up for the current fiscal processes. NOS was a surety for NOS SA for the amount of 15.3 million euros.
| 31-12-2015 | 31-03-2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| AUTOMATIC RENEWAL |
UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
AUTOMATIC RENEWAL |
UNTIL 1 YEAR |
BETWEEN 1 AND 5 YEARS |
OVER 5 YEARS |
|
| Stores, movie theatre and other buildings | 723 | 19,325 | 43,869 | 25,007 | 328 | 18,506 | 43,034 | 26,781 |
| Telecommunication towers and rooftops | 6,748 | 18,874 | 43,933 | 4,264 | 7,269 | 17,621 | 43,573 | 19,402 |
| Equipment | - | 1,948 | 4,835 | - | - | 1,181 | 2,159 | - |
| Vehicles | - | 2,842 | 4,197 - | - | 2,625 | 3,782 | - | |
| 7,471 | 42,989 | 96,833 | 29,271 | 7,597 | 39,933 | 92,548 | 46,182 |
The rentals due on operating leases have the following maturities:
Of the loans obtained (excluding finance leases), in addition to being subject to the Group complying with its operating, legal and fiscal obligations, 100% are subject to cross-default clauses, Pari Passu clauses and negative pledge clauses and 80% to ownership clauses.
In addition, approximately 41% of the total loans obtained require that the consolidated net financial debt does not exceed 3 times consolidated EBITDA, approximately 4% of the total loans obtained require that the consolidated net financial debt does not exceed 3.5 times consolidated EBITDA, and approximately 14% of the total loans obtained require that the consolidated net financial debt does not exceed 4 times consolidated EBITDA.
The EIB loan amounting to 110 million euros, maturing in 2022, is intended exclusively to finance the investment project to support the development of mobile broadband network in Portugal. This amount shall not, under any circumstances, exceed 50% of the project cost.
Following the final decision of the Competition Authority not to oppose the merger between ZON and Optimus SGPS the following commitment were made:
1) To ensure that NOS SA negotiated with Vodafone, until 31 October 2015, a contract that gives the option of buying its fiber network, it was concluded within the prescribed period.
In December 2015, NOS signed a contract with Sport Lisboa e Benfica - Futebol SAD and Benfica TV, SA of television rights of home matches of football NOS' league, broadcasting rights and distribution of Benfica TV Channel. The contract will begin in 2016/2017 sports season and has an initial duration of three years and may be renewed by decision of either party to a total of 10 sports seasons, with the overall financial consideration reaching the amount of 400 million euros, divided into progressive annual amounts.
Also in December 2015, NOS signed a contract with Sporting Clube de Portugal - Futebol SAD and Sporting and Communication Platforms, S.A. for the assignment of the following rights:
The contract will last 10 years concerning the rights indicated in 1) and 2) above, starting in July 2018, 12 years in the case of the rights stated in 3) starting in July 2017 and 12 and a half seasons in the case of the rights mentioned in 4) beginning in January 2016, with the overall financial consideration amounting to 446 million euros, divided into progressive annual amounts.
Also in December 2015, NOS SA has signed contracts regarding the television rights of home senior team football games with the following sports clubs:
The contracts wil begin in the 2019/2020 sports season and last up to 7 seasons, with the exception of the contract with Sporting Clube de Braga - Futebol, SAD which lasts 10 seasons.
Detailed summary of related parties as at 31 March 2016:
| 3shoppings - Holding, SGPS, S.A. Capwatt Colombo - Heat Power, S.A. 8ª Avenida Centro Comercial, SA Capwatt Engenho Novo - Heat Power, S.A. Accive Insurance Cons. e Franchising, Lda Capwatt Hectare - Heat Power, ACE Capwatt II - Heat Power, S.A. ADD Avaliações Engenharia de Avaliações e Perícias Ltda Capwatt III - Heat Power, S.A. Adlands B.V. Capwatt Maia - Heat Power, S.A. Capwatt Martim Longo - Solar Power, S.A. Aegean Park, S.A. Capwatt Vale do Caima - Heat Power, S.A. Capwatt Vale do Tejo - Heat Power, S.A. CAPWATT, SGPS, S.A. Agloma Investimentos, Sqps, S.A. Carvemagere-Manut.e Energias Renov., Lda Aguas Furtadas Sociedade Agrícola, SA ALBCC Albufeirashopping C.Comercial SA Casa Agrícola de Ambrães, S.A. ALEXA Administration GmbH Casa da Ribeira-Sociedade Imobiliária, SA ALEXA Asset GmbH & Co KG Cascaishopping - Centro Comercial, S.A. Cascaishopping Holding I, SGPS, S.A. CCCB Caldas da Rainha - Centro Comercial, SA Algarveshopping - Centro Comercial, S.A. Centro Colombo - Centro Comercial, S.A. Alpêssego - Soc. Agrícola, S.A Centro Residencial da Maia, Urban., S.A. Andar - Sociedade Imobiliária, S.A. Centro Vasco da Gama - Centro Comercial, S.A. Apor - Agência para a Modernização do Porto Chão Verde - Soc. Gestora Imobiliária, S.A. Ciminvest - Sociedade de Investimentos e Participações, S.A. Arat inmebles, S.A. Cinclus Imobiliária, S.A. ARP Alverca Retail Park, SA Cinveste, SGPS, SA Arrábidashopping - Centro Comercial, S.A. Citic Capital Sierra Limited Aserraderos de Cuellar, S.A. Citic Capital Sierra Prop. Man. Limited Atelgen-Produção Energia, ACE Citorres - Sociedade Imobiliária, S.A. Atlantic Ferries - Tráf.Loc, Flu. e Marít, S.A. Coimbrashopping - Centro Comercial, S.A. Avenida M - 40 B.V. Colombo Towers Holding, BV Azulino Imobiliária, S.A. Comercial Losan Polonia SP. Z.O.O. Comercial Losan, S.L.U. Companhia de Pesca e Comércio de Angola (Cosal), SARL Banco BPI, SA Companhia Térmica do Serrado, ACE BB Food Service, S.A. Companhia Térmica Tagol, Lda. Condis - Sociedade de distribuição, S.A. Beeskow Holzwerkstoffe Condis Limitada Beralands BV Bertimóvel - Sociedade Imobiliária, S.A. Contacto Concessões, SGPS, S.A. Big Picture 2 Films, SA Contibomba - Comérc.Distr.Combustiveis, S.A. Blackrock, Inc. Contimobe - Imobil.Castelo Paiva, S.A. Bloco Q - Sociedade Imobiliária, S.A. Continente Hipermercados, S.A. Boavista Shopping Centre BV Contry Club da Maia-Imobiliaria, S.A. BOM MOMENTO - Comércio Retalhista, SA Cooper Gay Swett & Crawford Lt Caixanet - Telecomunicações e Telemática, SA Craiova Mall BV Canal 20 TV CTE-Central Termoeléct. do Estuário, Lda Canasta - Empreendimentos Imobiliários, S.A. Cumulativa - Sociedade Imobiliária, S.A. Cape Technologies Limited Digitmarket - Sistemas de Informação, S.A. CAPWATT - Brainpower, S.A. Discovery Sports, SA |
RELATED PARTIES | |
|---|---|---|
| Accive Insurance-Corretor de Seguros, SA | ||
| Aduanas Caspe, S.L.U. | ||
| Agepan Eiweiler Management GmbH | ||
| ALEXA Holding GmbH | ||
| ALEXA Shopping Centre GmbH | ||
| Aqualuz - Turismo e Lazer, Lda | ||
| BA Business Angels, SGPS, SA | ||
| BA Capital, SGPS, SA | ||
| Capwatt ACE, S.A. | DOC Malaga Holdings, S.L. |
| RELATED PARTIES | |
|---|---|
| DOC Malaga SITECO, S.L.U. | Gots - Gestão, Organização, Desenvolvimento e Serviços, S.A. |
| Dortmund Tower GmbH | Grupo Visabeira, SGPS, SA |
| Dos Mares - Shopping Centre B.V. | Guimarãeshopping - Centro Comercial, S.A. |
| Dos Mares - Shopping Centre, S.A. | Harvey Dos Iberica, S.L. |
| Dreamia - Serviços de Televisão, S.A. | Herco Consultoria de Risco, S.A. |
| Dreamia Holding B.V. | Herco Consultoria de Riscos e Corretora de Seguros Ltda |
| East Star Ltd | HighDome PCC Limited |
| Ecociclo - Energia e Ambiente, S.A. | HighDome PCC Limited (Cell Europe) |
| EFACEC Electric Mobility, S.A. | Hipergest, S.A. |
| EFACEC ENERGIA - Máquinas e Equipamentos Eléctricos S.A. | Iberian Assets, S.A. |
| EFACEC Engenharia e Sistemas, S.A. | Igimo - Sociedade Imobiliária, S.A. |
| EFACEC Marketing Internacional, S.A. | Iginha - Sociedade Imobiliária, S.A. |
| EFACEC Power Solutions, SGPS, S.A. | Imoareia - Invest. Turísticos, SGPS, S.A. |
| EFACEC Serviços Corporativos, S.A. | Imobeauty, SA |
| Efanor Investimentos, SGPS, S.A. | Imoclub - Serviços Imobilários, S.A. |
| Efanor Serviços de Apoio à Gestão, S.A. | Imoconti - Soc.Imobiliária, S.A. |
| Elergone Energias, Lda | Imocontinente, S.A. |
| Emfísico Boavista | Imodivor - Sociedade Imobiliária, S.A. |
| Empreend.Imob.Quinta da Azenha, S.A. | Imoestrutura - Soc.Imobiliária, S.A. |
| Enerlousado-Recursos Energéticos, Lda. | Imogamek, S.A. |
| Estação Viana - Centro Comercial, S.A. | Imohotel - Emp. Turist. Imobiliários, S.A. |
| Euroresinas - Indústrias Quimicas, S.A. | Imoluanda, S.A. |
| Farmácia Selecção, S.A. | Imomuro - Sociedade Imobiliária, S.A. |
| Fashion Division Canárias, SL | Imopenínsula - Sociedade Imobiliária, S.A. |
| Fashion Division, S.A. | Imoplamac Gestão de Imóveis, S.A. |
| Feneralt-Produção de Enercia, ACE | Imoponte - Soc. Imobiliaria, S.A. |
| Fidequity - Serviços de Gestão, S.A. | Imoresort - Sociedade Imobiliária, S.A. |
| Filmes Mundáfrica, SARL | Imoresultado - Soc. Imobiliaria, S.A. |
| Finisantoro Holding Limited | Imosedas - Imobiliária e Seviços, S.A. |
| FINSTAR - Sociedade de Investimentos e Participações, SA | Imosistema - Sociedade Imobiliária, S.A. |
| Fozimo - Sociedade Imobiliária, S.A. | Impaper Europe GmbH & Co. KG |
| Frases e Frações Imobiliária e Serv., SA | Implantação - Imobiliária, S.A. |
| Freccia Rossa - Shopping Centre S.r.l. | Infofield - Informática, S.A. |
| Fundação José Berardo | Infratroia, EM |
| Fundo de Invest. Imobiliário Imosede | Inparvi SGPS, S.A. |
| Fundo Esp.Inv.Imo.Fec. WTC | Interlog - SGPS, S.A. |
| Fundo I.I. Parque Dom Pedro Shop.Center | |
| Ioannina Development of Shopping Centres, SA | |
| Fundo Invest. Imobiliário Imosonae Dois | IPI - Investimentos e Participações Industriais, S.A. |
| Fundo Invest.Imob.Shopp. Parque D.Pedro | Isoroy SAS |
| Fundo Investimento para Cinema e Audiovisual | ITRUST - Cyber Security and Intellig., SA |
| Gaiashopping I - Centro Comercial, S.A. | Kento Holding Limited |
| Gaiashopping II - Centro Comercial, S.A. | Laminate Park GmbH Co. KG |
| Gesgráfica - Projectos Gráficos, Lda | Land Retail B.V. |
| GHP Gmbh | Landscape - Promoções e Projectos Imobiliários, Lda |
| Gli Orsi Shopping Centre 1 Srl | Larim Corretora de Resseguros Ltda |
| Global Usebti, S.L. | Larissa Develop. Of Shopping Centers, S.A. |
| Glunz AG | Lazam - MDS Corretora e Administradora de Seguros, S.A. |
| Glunz Service GmbH | LCC LeiriaShopping Centro Comercial SA |
| Glunz UK Holdings Ltd | Le Terrazze - Shopping Centre 1 Srl |
| Glunz Uka Gmbh | Libra Serviços, Lda. |
| GMET, ACE | Lidergraf - Artes Gráficas, Lda. |
| Golf Time - Golfe e Invest. Turísticos, S.A. | Loop5 Shopping Centre GmbH |
| RELATED PARTIES | |
|---|---|
| Losan Colombia, S.A.S. | PantheonPlaza BV |
| Losan Overseas Textile, S.L. | Paracentro - Gest.de Galerias Com., S.A. |
| Losan Tekstil Urun. V E Dis Ticaret, L.S. | Pareuro, BV |
| Loureshopping - Centro Comercial, S.A. | Park Avenue Develop. of Shop. Centers S.A. |
| Lusitânia - Companhia de Seguros, SA | Parklake Shopping, SA |
| Lusitânia Vida - Companhia de Seguros, SA | Parque Atlântico Shopping - C.C., S.A. |
| Luz del Tajo - Centro Comercial S.A. | Parque D. Pedro 1 B.V. |
| Luz del Tajo B.V. | Parque de Famalicão - Empr. Imob., S.A. |
| Madeirashopping - Centro Comercial, S.A. | Pátio Boavista Shopping Ltda. |
| Maiashopping - Centro Comercial, S.A. | Pátio Campinas Shopping Ltda |
| Maiequipa - Gestão Florestal, S.A. | Pátio Goiânia Shopping Ltda |
| Marcas MC, ZRT | Pátio Londrina Empreend. e Particip. Ltda |
| Marina de Tróia S.A. | Pátio São Bernardo Shopping Ltda |
| Marmagno - Expl.Hoteleira Imob., S.A. | Pátio Sertório Shopping Ltda |
| Marvero - Expl.Hoteleira Imob., S.A. | Pátio Uberlândia Shopping Ltda |
| MDS Affinity - Sociedade de Mediação, Lda | PCJ - Público, Comunicação e Jornalismo, S.A. |
| MDS Africa SGPS, SA | Pharmaconcept - Actividades em Saúde, S.A. |
| MDS AUTO - Mediação de Seguros, SA | PHARMACONTINENTE - Saúde e Higiene, S.A. |
| MDS Corretor de Seguros, S.A. | Plaza Eboli - Centro Comercial S.A. |
| Mds Knowledge Centre, Unipessoal, Lda | Plaza Mayor Parque de Ócio BV |
| MDS Malta Holding Limited | Plaza Mayor Parque de Ocio, SA |
| MDS RE - Mediador de resseguros | Plaza Mayor Shopping BV |
| MDS, SGPS, SA | Plaza Mayor Shopping, SA |
| Megantic BV | Poliface North America |
| Metalgest - Sociedade de Gestão, SGPS, SA | Ponto de Chegada - Soc. Imobiliária, SA |
| Microcom Doi Srl | PORTCC - Portimãoshopping Centro Comercial, SA |
| MJB-Design, Lda | Porturbe - Edificios e Urbanizações, S.A. |
| MJLF - Empreendimentos Imobiliários, S.A. | Praedium - Serviços, S.A. |
| Modalfa - Comércio e Serviços, S.A. | Praedium II - Imobiliária, S.A. |
| MODALLOOP - Vestuário e Calçado, S.A. | Praedium SGPS, S.A. |
| Modelo - Dist.de Mat. de Construção, S.A. | Praesidium Services Limited |
| Modelo Continente Hipermercados, S.A. | Predicomercial - Promoção Imobiliária, S.A. |
| Modelo Continente Intenational Trade, SA | Predilugar - Sociedade Imobiliária, SA |
| Modelo Hiper Imobiliária, S.A. | Prédios Privados Imobiliária, S.A. |
| Modelo.com - Vendas p/Correspond., S.A. | Predisedas - Predial das Sedas, S.A. |
| Movelpartes - Comp.para Ind. Mobiliária, S.A. | Proj. Sierra Germany 4 (four) - Sh.C.GmbH |
| Mstar, SA | Proj. Sierra Germany 2 (two) - Sh. C. GmbH |
| Munster Arkaden, BV | Project SC 1 BV |
| Niara Holding, SGPS, Lda | Project Sierra 10 BV |
| Niara Power, Lda | Project Sierra 11 BV |
| Norges Bank | Project Sierra 12 BV |
| Norscut - Concessionária de Scut Interior Norte, S.A. | Project Sierra 2 BV |
| Norteshopping - Centro Comercial, S.A. | Project Sierra 8 BV |
| Norteshopping Retail and Leisure Centre, BV | Project Sierra Four Srl |
| Nova Cimangola, S.A. | Project Sierra Four, SA |
| Novodecor (PTY), LTD | Project Sierra Spain 1 B.V. |
| Ongoing Strategy Investments, SGPS, SA | Project Sierra Spain 2 - Centro Comer. S.A. |
| Operscut - Operação e Manutenção de Auto-estradas, S.A. | Project Sierra Spain 3 B.V. |
| OSB Deustchland Gmbh | Project Sierra Two Srl |
| Overseas Investments SA | Promessa Sociedade Imobiliária, S.A. |
| Panorama Equity Investments BV | Prosa - Produtos e serviços agrícolas, S.A. |
| RELATED PARTIES | |
|---|---|
| Público - Comunicação Social, S.A. | Sierra GP Limited |
| QCE-Desenv. e Fabrico de Equipamentos, SA | Sierra Greece, SA |
| Racionaliz. y Manufact. Florestales, S.A. | Sierra Investimentos Brasil Ltda |
| Rio Sul - Centro Comercial, S.A. | Sierra Investments (Holland) 1 B.V. |
| River Plaza Mall, Srl | Sierra Investments (Holland) 2 B.V. |
| River Plaza, BV | Sierra Investments Holding B.V. |
| Ronfegen-Recursos Energéticos, Lda. | Sierra Investments SGPS, S.A. |
| RSI Corretora de Seguros Ltda | Sierra Italy, Srl |
| S.C. Microcom Doi Srl | Sierra Management, SGPS, S.A. |
| S21 Sec Brasil, Ltda | Sierra Portugal, S.A. |
| S21 Sec Ciber Seguridad, S.A. de CV | Sierra Project Nürnberg BV |
| S21 SEC Gestion, S.A. | Sierra Real Estate Greece BV |
| S21 Sec Information Security Labs, S.L. | Sierra Romania Sh. Centers Services Srl |
| S21 Sec México, S.A. de CV | Sierra Services Holland 2 BV |
| S21 Sec, S.A. de CV | Sierra Solingen Holding GmbH |
| Santoro Finance - Prestação de Serviços, S.A. | Sierra Spain ShoppinG Centers Services S.A.U. |
| Santoro Financial Holding, SGPS, S.A. | Sierra Turkey Gayrim. Yön. P. Dan. An. Sirket |
| Saphety - Transacciones Electronicas SAS | Sierra VdG Holding BV |
| Saphety Brasil Transações Eletrônicas Ltda. | Sierra Zenata Project BV |
| Saphety Level - Trusted Services, S.A. | SII - Soberana Invest. Imobiliários, S.A. |
| Saúde Atlântica - Gestão Hospitalar, S.A. | SIRS - Sociedade Independente de Radiodifusão Sonora, S.A. |
| SC - Consultadoria, S.A. | SISTAVAC, S.A. |
| SC - Eng. e promoção imobiliária, SGPS, S.A. | SISTAVAC, SGPS, S.A. |
| SC Aegean B.V. | SISTAVAC-Sistemas HVAC-R do Brasil, Ltda |
| SC Finance BV | Soc.Inic.Aproveit.Florest.-Energias,SA |
| SC For-Serv.Form.e Desenv.R.H.,Unip.,Lda | Sociedade de Construções do Chile, S.A. |
| SC Hospitality, SGPS, S.A. | Société de Tranchage Isoroy S.A.S. |
| SC, SGPS, SA | Socijofra - Sociedade Imobiliária, S.A. |
| SDSR - Sports Division SR, S.A. | Sociloures - Soc. Imobiliária, S.A. |
| Selifa - Empreendimentos Imobiliários, S.A. | Socip - Sociedade de Investimentos e Participações, S.A. |
| Sempre à Mão - Sociedade Imobiliária, S.A. | Sodiba Limitada |
| Sempre a Postos - Produtos Alimentares e Utilidades, Lda | Soflorin, BV |
| Serra Shopping – Centro Comercial, S.A. | Soira - Soc. Imobiliária de Ramalde, S.A. |
| Sesagest - Proj. Gestão Imobiliária, S.A. | Solinca - Health and Fitness, SA |
| Sete e Meio - Invest. Consultadoria, S.A. | Solinca - Investimentos Turísticos, S.A. |
| Sete e Meio Herdades - Inv. Agr. e Tur., S.A. | Solinfitness - Club Malaga, S.L. |
| SGC, SGPS, SA | Solingen Shopping Center GmbH |
| Shopping Centre Colombo Holding BV | Soltroia - Imob. de Urb. Turismo de Tróia, S.A. |
| Shopping Centre Parque Principado B.V. | Somit Imobiliária, SA |
| SIAL Participações Ltda | Sonae Capital Brasil, Lda |
| Sierra - OST Property Management | Sonae Capital, SGPS, S.A. |
| Sierra Asia Limited | Sonae Center Serviços II, SA |
| Sierra Berlin Holding BV | Sonae com - Sistemas Informação, SGPS, S.A. |
| Sierra Brazil 1 BV | Sonae Financial Services, S.A. |
| Sierra Central S.A.S | Sonae Ind., Prod. e Com.Deriv.Madeira, S.A. |
| Sierra Cevital Shopping Center, Spa | Sonae Indústria - SGPS, S.A. |
| Sierra Core Assets Holdings, B.V. | |
| Sierra Corporate Services Holland, BV | Sonae Industria (UK), Ltd Sonae Industria de Revestimentos, S.A. |
| Sierra Developments Holding B.V. | Sonae Investimentos, SGPS, SA |
| Sierra Developments, SGPS, S.A. | Sonae Investments BV |
| Sierra European R.R.E. Assets Hold. B.V. | Sonae MC - Modelo Continente, SGPS, SA |
| Sierra Germany GmbH | Sonae Novobord (PTY) Ltd |
| RELATED PARTIES | |
|---|---|
| Sonae RE, S.A. | The Artist Porto Hot.&Bistrô-Act.Hot.,SA |
| Sonae Retalho Espana - Servicios Gen., S.A. | TLANTIC B.V. |
| Sonae SGPS, S.A. | Tlantic Portugal - Sist. de Informação, S.A. |
| Sonae Sierra Brasil S.A. | Tlantic Sistemas de Informação Ltdª |
| Sonae Sierra Brazil, BV / SARL | TM Administration Services B.V. |
| Sonae Sierra, SGPS, S.A. | Tool Gmbh |
| Sonae Specialized Retail, SGPS, SA | Troia Market, S.A. |
| Sonae SR Malta Holding Limited | Tróia Natura, S.A. |
| Sonae Tafibra Benelux, BV | Troiaresort - Investimentos Turísticos, S.A. |
| Sonae Turismo, SGPS, S.A. | Troiaverde - Expl.Hoteleira Imob., S.A. |
| Sonaecenter Serviços, S.A. | Tulipamar - Expl.Hoteleira Imob., S.A. |
| Sonaecom - Serviços Partilhados, S.A. | Turismo da Samba (Tusal), SARL |
| Sonaecom - Sistemas de Información España, S.L. | Unipress – Centro Gráfico, Lda |
| Sonaecom BV | Unishopping Consultoria Imob. Ltda. |
| Sonaecom, SGPS, S.A. | Unitel International Holdings, B.V. |
| Sonaecom-Cyber Security and Int.,SGPS,SA | Unitel STP |
| Sonaegest - Soc. Gest. Fundos Investimentos | Unitel T+ |
| Sonaerp - Retail Properties, SA | Upstar Comunicações SA |
| SONAESR - Serviços e logistica, SA | Urbinveste - Promoções e Projectos Imobiliários, S.A. |
| Sonaetelecom BV | Urbisedas - Imobiliária das Sedas, S.A. |
| Sondis Imobiliária, S.A. | Usebti Textile México S.A. de C.V. |
| Sontel BV | Valor N, S.A. |
| Sonvecap BV | Vastgoed One - Sociedade Imobiliária, S.A. |
| Sopair, S.A. | Vastgoed Sun - Sociedade Imobiliária, S.A. |
| Sotáqua - Soc. de Empreendimentos Turist | Via Catarina - Centro Comercial, S.A. |
| Soternix-Produção de Energia, ACE | Vidatel, Ltd |
| Spanboard Products, Ltd | Vistas do Freixo, SA |
| SPF - Sierra Portugal Real Estate, Sarl | Vuelta Omega, S.L. |
| SPF - Sociedade de Participações Financeiras, Lda | WeDo Consulting - Sistemas de Informação, S.A. |
| Spinarg - Engenharia, Energia e Ambiente, SA | WeDo do Brasil - Soluções Informáticas, Ltda |
| Spinarq Moçambique, Lda | WeDo Poland Sp. Z.o.o. |
| Spinveste - Gestão Imobiliária SGII, S.A. | WeDo Technologies (UK) Limited |
| Spinveste - Promoção Imobiliária, S.A. | WeDo Technologies Americas, Inc. |
| Sport TV Portugal, S.A. | WeDo Technologies Australia PTY Limited |
| Sport Zone Canárias, SL | WeDo Technologies BV |
| Sport Zone España-Com.Art.de Deporte,SA | WeDo Technologies BV - Sucursal Malaysia |
| Sport Zone spor malz.per.satis ith.ve ti | WeDo Technologies Egypt LLC |
| Spred, SGPS, SA | WeDo Technologies Mexico, S de R.L. |
| SSI Angola, S.A. | Weiterstadt Shopping BV |
| Stinnes Holz GmbH | Winterfell 2 Limited |
| STP Cabo SARL | Winterfell Industries Limited |
| Tableros Tradema, S.L. | Wise Intelligence Solutions Holding Limited |
| Tafiber,Tableros de Fibras Ibéricas, SL | Wise Intelligence Solutions Limited |
| Tafibra South Africa (PTY) Ltd. | Worten - Equipamento para o Lar, S.A. |
| Tafibra Suisse, SA | Worten Canárias, SL |
| Tafisa - Tableros de Fibras, S.A. | Worten España Distribución, SL |
| Tafisa Canadá Societé en Commandite | Yako - Retalho Alimentar, S.A. |
| Tafisa France, S.A. | ZAP Cinemas, S.A. |
| Tafisa UK, Ltd | ZAP Media, S.A. |
| Taiber, Tableros Aglomerados Ibéricos, SL | ZAP Publishing, S.A. |
| Tecmasa Reciclados de Andalucia, SL | Zenata Commercial Project S.A. |
| Tecnológica Telecomunicações LTDA. | ZIPPY - Comércio e Distribuição, SA ZIPPY - Comercio y Distribución, S.A. |
| Teconologias del Medio Ambiente,SA Telefónica, SA |
Zippy cocuk malz.dag.ith.ve tic.ltd.sti |
| Terra Peregin - Participações SGPS, S.A. | ZOPT, SGPS, S.A. |
| Têxtil do Marco, S.A. | 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 2015 and 31 March 2016 and transactions in the quarters ended on 31 December 2015 and 31 March 2016 between NOS Group and its associated companies, joint ventures and other related parties are as follows:
| ACCOUNTS RECEIVABLES |
ACCOUNTS PAYABLE |
ACCRUED EXPENSES |
DEFERRED INCOME |
PREPAID EXPENSES |
|
|---|---|---|---|---|---|
| SHAREHOLDERS | |||||
| Banco BPI | 1,994 | (19) | - | - | - |
| Sonaecom | 118 | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||
| Big Picture 2 Films | 13 | 1,335 | 361 | - | - |
| Dreamia Holding BV | 2,579 | - | - | - | - |
| Dreamia SA | 1,717 | 861 | 188 | - | - |
| Finstar | 9,982 | - | - | - | - |
| Mstar | 1 | - | - | - | - |
| Sport TV | 885 | 12,521 | 4,164 | - | - |
| Upstar | 13,617 | - | - | - | - |
| ZAP Cinemas | 465 | - | - | ||
| ZAP Media | 3,015 | - | - | - | - |
| OTHER RELATED PARTIES | |||||
| Cascaishopping Centro Comercial | 3 | 59 | - | - | 57 |
| Digitmarket-Sistemas de Informação | 42 | 962 | - | 3 | 245 |
| ITRUST - Cyber Security and Intellig. | 5 | 144 | 8 | - | - |
| Modelo Continente Hipermercados | 1,188 | 126 | (120) | - | 3 |
| MDS - Corretor de Seguros | 40 | - | - | - | 107 |
| SC-Consultadoria | 171 | - | - | 20 | - |
| Sonae Ind., Prod. e Com.Deriv.Madeira | 115 | - | - | 2 | - |
| Sierra Portugal | 637 | (25) | 58 | 5 | 383 |
| Sonae Center Serviços II | 701 | 8 | 49 | 149 | - |
| Sonaecom - Serviços Partilhados | 41 | 86 | 5 | - | - |
| SDSR - Sports Division SR | 124 | - | - | - | - |
| Unitel | 1,709 | 968 | 969 | - | - |
| We Do Consulting-Sist. de Informação | 139 | 1,245 | - | - | 44 |
| Worten - Equipamento para o Lar | 2,474 | (6) | 389 | - | - |
| Other related parties | 625 | 123 | 40 | 7 | 48 |
| 42,399 | 18,386 | 6,113 | 184 | 887 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS | MARKETING AND ADVERTISING |
SUPPORT SERVICES |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | |||||||||
| BPI | 744 | - | - | - | - | - | - | (193) | - |
| Sonaecom | 4 | - | - | - | - | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED | |||||||||
| COMPANIES | |||||||||
| Big Picture 2 Films | 43 | - | 869 | - | - | 674 | - | - | - |
| Dreamia Holding BV | 84 | - | - | - | - | - | - | 63 | - |
| Dreamia SA | 715 | - | (398) | - | - | (5) | - | - | - |
| Finstar | 22 | - | - | - | - | - | - | - | - |
| Mstar | 113 | - | - | - | - | - | - | - | - |
| Sport TV | 49 | - | 11,761 | - | - | - | - | - | - |
| Upstar | 2,808 | - | (144) | - | - | (3) | 382 | - | - |
| ZAP Media | 116 | - | - | - | - | - | - | - | - |
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping | 4 | - | - | 2 | - | 156 | - | - | - |
| Digitmarket | 41 | - | - | - | 26 | 50 | - | - | 71 |
| MDS - Corretor de Seguros | 125 | - | - | - | 2 | - | - | - | |
| Modelo Continente Hipermercados | 948 | - | 14 | 101 | (27) | - | - | - | |
| Raso - Viagens e Turismo | 97 | 26 | - | 71 | 8 | 537 | - | - | - |
| Saphety Lev el |
29 | - | - | - | 166 | 1 | - | - | 7 |
| SC Consultadoria | 235 | - | - | - | - | - | - | - | |
| Sierra Portugal | 953 | - | - | 66 | 1,309 | - | - | - | |
| Sonae Indústria PCDM | 254 | - | - | - | - | - | - | - | |
| Sonaecenter II | 441 | - | - | - | 21 | - | - | - | - |
| Sonaecom - Serv iços Partilhados |
106 | 100 | - | - | 12 | 2 | - | - | - |
| We Do Consulting | 131 | - | - | - | 1,228 | 3 | - | - | 711 |
| Worten | 52 | - | - | 310 | 245 | - | - | 0 | |
| Other related parties | 744 | (0) | 8 | 29 | 61 | 188 | - | - | 67 |
| 8,856 | 126 | 12,109 | 580 | 1,522 | 3,132 | 382 | (130) | 856 |
| ACCOUNTS RECEIVABLES |
ACCOUNTS PAYABLE |
ACCRUED EXPENSES |
DEFERRED INCOME |
PREPAID EXPENSES |
|
|---|---|---|---|---|---|
| SHAREHOLDERS | |||||
| Sonaecom | 1,918 | (40) | 104 | - | - |
| BPI | 179 | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED COMPANIES |
|||||
| Big Picture 2 Films | 6 | 1,174 | 362 | - | - |
| Dreamia Holding BV | 2,721 | - | - | - | - |
| Dreamia SA | 3,196 | 1,088 | 305 | - | - |
| Finstar | 9,578 | - | - | - | - |
| Mstar | 1 | - | - | - | - |
| Sport TV | 1,061 | 33,174 | (1,819) | - | 12,195 |
| Upstar | 11,990 | - | - | - | - |
| ZAP Cinemas | 482 | ||||
| ZAP Media | 3,127 | - | - | - | - |
| OTHER RELATED PARTIES | |||||
| Digitmarket | 68 | 37 | - | 4 | 178 |
| SC-Consultadoria | 236 | - | - | 30 | - |
| MDS - Corretor de Seguros | 61 | - | (0) | - | 61 |
| Modelo Continente Hipermercados | 1,047 | 59 | 2 | - | 3 |
| Saphety Level - Trusted Services | 53 | 122 | - | - | 31 |
| Sierra Portugal | 519 | 80 | 2 | 2 | 367 |
| Sonae Center II | 443 | 6 | (10) | 144 | - |
| Sonae Ind., Prod. e Com.Deriv.Madeira | 216 | - | - | - | - |
| Spinveste - Promoção Imobiliária | 43 | 43 | - | - | 24 |
| UNITEL | 1,546 | 423 | 1,172 | - | - |
| We Do Consulting-Sist. de Informação | 169 | 1,890 | - | - | 177 |
| Worten - Equipamento para o Lar | 1,825 | 143 | 270 | - | - |
| Other related parties | 946 | 217 | (124) | 4 | 90 |
| 41,432 | 38,415 | 263 | 184 | 13,126 |
| REVENUES | WAGES AND SALARIES |
DIRECT COSTS | MARKETING AND ADVERTISING |
SUPPORT SERVICES |
SUPPLIES AND EXTERNAL SERVICES |
OTHER OPERATING LOSSES / (GAINS) |
FINANCIAL INCOME AND (EXPENSES) |
FIXED ASSETS | |
|---|---|---|---|---|---|---|---|---|---|
| SHAREHOLDERS | |||||||||
| Banco BPI | 1,273 | - | 104 | - | - | 1 | - | (87) | - |
| Sonaecom | 14 | (53) | - | - | - | - | - | - | - |
| JOINTLY CONTROLLED COMPANIES AND ASSOCIATED | |||||||||
| COMPANIES | |||||||||
| Big Picture 2 Films | 5 | - | 2,050 | - | - | 23 | - | - | - |
| Dreamia Holding BV | 69 | - | - | - | - | - | - | 72 | - |
| Dreamia SA | 655 | (1) | (261) | - | - | (3) | - | - | - |
| Finstar | 211 | - | - | - | - | - | - | - | - |
| Mstar | 11 | - | - | - | - | - | - | - | - |
| Sport TV | 38 | - | 12,722 | - | - | - | - | - | - |
| Upstar | 3,454 | - | (203) | - | - | - | - | - | - |
| ZAP Cinemas | 18 | - | - | - | - | - | - | - | - |
| ZAP Media | 116 | - | - | - | - | - | - | - | - |
| OTHER RELATED PARTIES | |||||||||
| Cascaishopping | 4 | - | - | 2 | - | 172 | - | - | - |
| Digitmarket | 89 | - | - | - | 84 | 108 | - | - | 88 |
| MDS - Corretor de Seguros | 112 | - | - | - | - | 46 | - | - | - |
| Modelo Continente Hipermercados | 1,126 | - | 1 | 94 | - | (28) | - | - | - |
| Saphety | 37 | - | - | - | 168 | 1 | - | - | 16 |
| SC Consultadoria | 264 | - | - | - | - | - | - | - | - |
| SDSR - Sports Div ision SR |
127 | - | - | - | - | - | - | - | - |
| Sierra Portugal | 871 | - | - | 82 | - | 1,230 | - | - | - |
| Sonae Center II | 335 | 3 | - | - | 1 | (7) | - | - | - |
| Sonae Indústria PCDM | 222 | - | - | - | - | - | - | - | - |
| UNITEL | 527 | - | 173 | - | - | - | - | - | - |
| Wedo | 136 | - | - | - | 685 | 49 | - | - | 810 |
| Worten | 1,163 | - | - | 112 | - | 181 | - | - | 1 |
| Other related parties | 913 | - | - | 16 | 44 | 187 | - | - | 44 |
| 11,792 | (51) | 14,586 | 305 | 981 | 1,961 | - | (15) | 958 |
The Company regularly performs transactions and signs contracts with several parties within the NOS Group. Such transactions were performed on normal market terms for similar transactions, as part of the contracting companies' current activity.
The Company also regularly performs transactions and enters into financial contracts with various credit institutions which hold qualifying shareholdings in the Company. However, these are performed on normal market terms for similar transactions, as part of the contracting companies' current activity.
Due to the large number of low value related parties balances and transactions, it was grouped in the heading "Other related parties" the balances and transactions with entities whose amounts are less than 100 thousand euros.
NOS SA (i), NOS Açores (ii) and NOS Madeira (iii) brought actions for judicial review of ANACOM's decisions in respect of the payment of the Annual Fee (for 2009, 2010, 2011, 2012, 2013, 2014 and 2015) for carrying on the business of Electronic Communications Services Networks Supplier in the amounts, respectively, of (i) 1,861 thousand euros, 3,808 thousand euros, 6,049 thousand euros, 6,283 thousand euros, 7,270 thousand euros, 7,426 thousand euros and 7,253 thousand euros; (ii) 29 thousand euros, 60 thousand euros, 95 thousand euros, 95 thousand euros, 104 thousand euros, 107 thousand euros and 98 thousand euros; (iii) 40 thousand euros, 83 thousand euros, 130 thousand euros, 132 thousand euros, 149 thousand euros, 165 thousand euros and 161 thousand euros, and seeking reimbursement of the amounts meanwhile paid in connection with the enforcement proceedings. This fee is a percentage decided annually by ANACOM (in 2009 it was 0.5826%) of operators' electronic communications revenues. The scheme is being introduced gradually: ⅓ in the first year, ⅔ in the second year and 100% in the third
year. NOS SA, NOS Açores and NOS Madeira claim, in addition to defects of unconstitutionality and illegality, that only revenues from the electronic communications business per se, subject to regulation by ANACOM, should be considered for the purposes of the application of the percentage and the calculation of the fee payable, and that revenues from television content should be excluded.
On 18 December 2012 a ruling was passed on the proceedings instigated by NOS SA for the annual rate of 2009, for which the appeal was upheld, with no prior hearing, condemning ICP-ANACOM to pay the costs. ANACOM appealed and by decision of July 2013, this appeal was not upheld.
The remaining proceedings are awaiting trial and decision.
During the course of the 2003 to 2015 financial years, some companies of the NOS Group were the subject of tax inspections for the 2001 to 2013 financial years. Following these inspections, NOS, as the controlling company of the Tax Group, and companies not covered by Tax Group, were notified of the corrections made to the Group's tax losses, to VAT and stamp tax and to make the payments related to the corrections made to the above exercises. The total amount of the notifications unpaid is about 22.7 million euros, plus interest and charges. Note that the Group considered that the corrections were unfounded, and contested the amounts mentioned. The Group provided the bank guarantees demanded by the Tax Authorities in connection with these proceedings, as stated in Note 37.
At end of year 2013 and taking advantage of the extraordinary settlement scheme of tax debts, the Group settled 7.7 million euros. This amount was recorded as "taxes receivable" non-current net of the provision recorded in the amount of 3.5 million euros (Note 11).
As belief of the Board of Directors of the group, supported by our lawyers and tax advisors, the risk of loss of these proceedings is not likely and the outcome thereof will not affect materially the consolidated position.
MEO doesn't indicate in all notifications the amounts in which it wants to be financially compensated, specifying only part of these, in the case of NOS SA, in the amount of 26 million euros (from August 2011 and May 2014), in the case of NOS Açores, in the amount of 195 thousand euros and NOS Madeira, amounting to 817 thousand euros.
In 2011, NOS SA brought an action in the Lisbon Judicial Court against PT, claiming payment of 22.4 million euros, for damages suffered by NOS SA, arising from violations of the Portability Regulation by MEO, in particular, the large number of unjustified refusals of portability requests by PT in the period between February 2008 and February 2011. The court declared the compulsory performance of expert evidence, which is currently underway, the expert report having been notified to the parties and the parties have submitted their requests for clarification to the experts. At the same time, experts who will be tasked with the economic and financial expertise have been appointed.
It is the understanding of the Board of Directors, supported by lawyers who monitor the process, that there is, in substance, a good possibility of NOS SA winning the action, due to the fact that MEO has already been convicted for the same offense, by ICP – ANACOM. However, it is impossible to determine the outcome of the action. In the event of action be judged totally unfounded, the court costs, which are the responsibility of NOS could amount to over 1 million euros.
In 2014, a NOS SGPS provider's of marketing services has brought a civil lawsuit seeking a payment of about 1,243 thousand euros, by the alleged early termination of contract and for compensation.
The Court of First Instance acquitted the NOS SGPS instance, based on passive illegitimacy than the author appealed. The Court of Appeal upheld the appeal of Lisbon, but the author complained of it by maintaining that its appeal should be assessed not by the Court of Appeal but the Supreme Court. The Supreme Court, called to rule on the issue in March 2016, upheld the exception of passive illegitimacy of NOS SGPS and absolved the instance. It is belief of the Board of Directors that the arguments used are not correct, so the outcome of the proceeding will not result in significant impact on the financial statements of the group.
SPORT TV Portugal, S.A. was fined by the Competition Authority to the value of 3,730 thousand euros for the alleged abuse of its dominant position in the domestic market of subscription channels with premium sport content.
SPORT TV is not in agreement with the decision and has therefore challenged it in court, and in this context, the Court of Competition, Regulation and Supervision altered the value to 2,700 thousand euros. Meanwhile, Sport TV has appealed to the "Tribunal da Relação" (Court of Appeal) which has rejected said appeal as unfounded. Sport TV contested that decision to the Constitutional Court and, in a specific matter to the Supreme Court of Justice, appeals which are pending.
Action brought by Cogeco Cable Inc., former shareholder of Cabovisão, against Sport TV, NOS SGPS and a third, requesting, among others: (i) joint condemnation of the three institutions to pay compensation for damages caused by anti-competitive conduct, guilty and illegal, between 3 August 2006 and 30 March 2011, specifically for the excess price paid for Sport TV channels by Cabovisão, in the amount of 9.1 million euros; (ii) condemnation for damages corresponding to the remuneration of capital unavailable, in the amount 2.4 million euros; and (iii) condemnation for damages corresponding to the loss of business from anti-competitive practices of Sport TV, in connection with the enforcement proceedings. NOS contested the action, awaiting for trial.
It is the understanding of the Board of Directors, supported by lawyers who monitor the process, that, in particularly in formal motives, it is unlikely that NOS SA is responsible in this action.
Cabovisão brought an action against the SPORT TV, in which it requests compensation from the latter for alleged losses resulting from abuse of a dominant position, amounting to 18 million euros, added capital and interests, that were paid in 31 December 2015, and lost profits. The Board of Directors of Sport TV and lawyers, who monitor the process, predict a favorable outcome, not estimating impacts in the accounts, in addition to those already registered.
The general conditions that affect the agreement and termination of this contract between NOS and its clients, establish that if the products and services provided by the client can no longer be used prior to the end of the binding period, the client is obliged to immediately pay damages.
Until 31 December 2014, revenue from penalties, due to inherent uncertainties was recorded only at the moment when it was received, so at 31 March 2016, the receivables by NOS SA, NOS Madeira and NOS Açores amount to a total of 108,246 thousand euros. During the quarter ended on 31 March 2016 1.253 thousand euros related to 2015 receivables were received and recorded in the income statement.
From 1 January 2015, revenue from penalties is recognised taking into account an estimated collectability rate taking into account the Group's collection history. The penalties invoiced are recorded as accounts receivable and amounts determined as uncollectible are recorded as impairment by deducting revenue recognized upon invoicing (Note 27).
At 31 March 2016, accounts receivable and accounts payable include 37,139,253 euros and 29,913,608 euros, respectively, resulting from a dispute between the subsidiary NOS SA and, essentially, the operator MEO – Serviços de Comunicação e Multimédia, S.A. (previously named TMN – Telecomunicações Móveis Nacionais, S.A.), in relation to the indefinition of interconnection tariffs, recorded in the year ended at 31 December 2001. In the lower court, the decision was favorable to NOS SA. The "Tribunal da Relação" (Court of Appeal), on appeal, rejected the intentions of MEO. However, MEO again appealed to the "Supremo Tribunal de Justiça" (Supreme Court), for final and permanent decision, who upheld the decision of the "Tribunal da Relação" (Court of Appeal), thus concluding that the interconnection prices for 2001 were not defined. The settlement of outstanding amounts will depend on the price that will be established.
On 23 April 2014, the General Meeting approved the Regulation on Short and Medium Term Variable Remuneration, which establishes the terms of the Share incentive Schemes ("NOS Plan"). This plan aimed at more senior employees with the vesting taking place three years being awarded, assuming that the employee are still with the company during that period.
In addition to the NOS Plan abovementioned, at 31 December 2015, are still unvested:
i) The Share Incentive Schemes approved by the General Meetings of Shareholders on 27 April 2008 and 19 April 2010 ("Standard Plan" and "Senior 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, has a vesting period of 3 years following the attribution of the shares, assuming that the employees are still employed in the Group, during that period.
ii) The Optimus Group had implemented a share incentive scheme for more senior employees based on Sonaecom shares ("Optimus Plan"), subsequently converted into NOS shares in the date of the merger (27 August 2013). Optimus Plan was aimed to employees above a certain function level. The vesting occurs three years after the award of each plan, assuming that the employees are still employed in the Group, during that period.
iii) NOS Sistemas, formerly named Mainroad, had implemented a share incentive scheme for more senior employees based on Sonaecom shares ("Mainroad Plan"), subsequently converted into NOS shares in the acquisition date (20 September 2014). Mainroad Plan was aimed to employees above a certain function level. The vesting occurs three years after the award of each plan, assuming that the employees are still employed in the Group, during that period.
As at 31 March 2016, the unvested plans are:
| NUMBER OF | |
|---|---|
| SHARES | |
| STANDARD PLAN | |
| Plan 2011 | 2,857 |
| Plan 2012 | 62,229 |
| Plan 2013 | 124,840 |
| Plan 2013 | - |
| MAINROAD PLAN | |
| Plan 2014 | 44,433 |
| NOS PLAN | |
| Plan 2014 | 859,555 |
| Plan 2015 | 648,906 |
During the quarter ended on 31 March 2016, the movements that occurred in the plans, are detailed as follows:
| SENIOR | STANDARD | OPTIMUS | MAINROAD | NOS | |
|---|---|---|---|---|---|
| PLAN | PLAN | PLAN | PLAN | PLAN | |
| BALANCE AS AT 31 DECEMBER 2015: | 163,909 | 376,269 | 1,171,594 | 132,606 | 1,537,786 |
| MOVEMENTS IN THE PERIOD: | |||||
| Vested | (116,823) | (179,677) | (1,079,340) | (88,173) | (25,274) |
| Cancelled / elapsed / corrected (1) | (47,086) | (6,666) | (92,254) | - | (4,051) |
| BALANCE AS AT 31 MARCH 2016: | - | 189,926 | - | 44,433 | 1,508,461 |
(1) Refers mainly to correction made for dividends paid, exit of employees not entitled to the vesting of shares and other adjustments resulting from the way the shares are vested.
The share plans costs are recognised over the year between the awarding and vesting date of those shares. The responsibility is calculated taking into consideration the share price at award date of each plan, however for the Optimus plan and Mainroad plan, the award date is the date of the merger and acquisition (the time of conversion of Sonaecom shares plans into NOS shares plans), respectively. As at 31 March 2016, the outstanding responsibility related to these plans is 5,243 thousand euros and is recorded in reserves.
The costs recognised in previous years and in the period, its liabilities are as follows:
| TOTAL | |
|---|---|
| Costs recognised in previous years related to plans as at 31 December 2016 | 10,111 |
| Costs of plans vested in the period | (5,927) |
| Costs recognised in the period and others | 1,059 |
| TOTAL COST OF THE PLANS (REGISTERED IN RESERVES) | 5,243 |
Until the date of this document, there were no other significant subsequent events that merit disclosure in this report.
| SHARE | PERCENTAGE OF OWNERSHIP | ||||||
|---|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | HOLDER | EFFECTIVE | DIRECT | EFFECTIVE | |
| 31-12-2015 | 31-03-2016 | 31-03-2016 | |||||
| NOS, SGPS, S.A. (Holding) Empracine - Empresa Promotora de |
Lisbon | Management of investments | - Lusomundo |
- | - | - | |
| Atividades Cinematográficas, Lda. | Lisbon | Movies exhibition | SII | 100% | 100% | 100% | |
| Lusomundo - Sociedade de investimentos imobiliários SGPS, SA |
Lisbon | Management of Real Estate | NOS | 100% | 100% | 100% | |
| Lusomundo Imobiliária 2, S.A. | Lisbon | Management of Real Estate | Lusomundo SII |
100% | 100% | 100% | |
| Lusomundo Moçambique, Lda. | Maputo | Movies exhibition and commercialization of other public events |
NOS Cinemas |
100% | 100% | 100% | |
| NOS Sistemas, S.A. ('NOS Sistemas') | Lisbon | Rendering of consulting services in the area of information systems |
NOS SA | 100% | 100% | 100% | |
| NOS Sistemas España, S.L. | Madrid | Rendering of consulting services in the area of information systems |
NOS SA | 100% | 100% | 100% | |
| NOS Açores Comunicações, S.A. | Ponta Delgada | Distribution of television by cable and satellite and operation of telecommunications services in the Azores area |
NOS SA | 84% | 84% | 84% | |
| NOS Communications S.à r.l | Luxemburgo Management of investments | NOS | 100% | 100% | 100% | ||
| NOS Comunicações, S.A. | Lisbon | Implementation, operation, exploitation and offer of networks and rendering services of electronic comunications and related resources; offer and commercialisation of products and equipments of electronic communications |
NOS | 100% | 100% | 100% | |
| NOS Inovação, S.A. | Matosinhos | Achievement and promotion of scientific activities and research and development as well as the demonstration, dissemination, technology transfer and formation in the fields of services and information systems and fixed solutions and last generation mobile, television, internet, voice and data, and licensing and engineering services and consultancy |
NOS | 100% | 100% | 100% | |
| NOS Lusomundo Audiovisuais, S.A. | Lisbon | Import, distribution, commercialization and production of audiovisual products |
NOS | 100% | 100% | 100% | |
| NOS Lusomundo Cinemas , S.A. | Lisbon | Movies exhibition and commercialization of other public events |
NOS | 100% | 100% | 100% | |
| NOS Lusomundo TV, Lda. | Lisbon | Movies distribution, editing, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
100% | 100% | 100% | |
| NOS Madeira Comunicações, S.A. | Funchal | Distribution of television by cable and satellite and operation of telecommunications services in the Madeira area |
NOS SA | 78% | 78% | 78% | |
| NOSPUB, Publicidade e Conteúdos, S.A. | Lisbon | Comercialization of cable tv contents | NOS SA | 100% | 100% | 100% | |
| NOS TECHNOLOGY – Concepção, Construção e Gestão de Redes de Comunicações, S.A. ('Artis') |
Matosinhos | Design, construction, management and exploitation of electronic communications networks and their equipment and infrastructure, management of technologic assets and rendering of related services |
NOS | 100% | 100% | 100% | |
| NOS TOWERING – Gestão de Torres de Telecomunicações, S.A. ('Be Towering') |
Lisbon | Implementation, installation and exploitation of towers and other sites for the instalment of telecommunications equipment |
NOS | 100% | 100% | 100% | |
| Per-Mar – Sociedade de Construções, S.A. ('Per-Mar') |
Lisbon | Purchase, sale, renting and operation of property and commercial establishments |
NOS | 100% | 100% | 100% | |
| Sontária - Empreendimentos Imobiliários, S.A. ('Sontária') |
Lisbon | Realisation of urbanisation and building construction, planning, urban management, studies, construction and property management, buy and sale of properties and resale of purchased for that purpose |
NOS | 100% | 100% | 100% | |
| Teliz Holding B.V. | Amesterdan | Management of group financing activities | NOS | 100% | 100% | 100% | |
| ZON FINANCE B.V. (a) | Amesterdan | Management of group financing activities | NOS SA / NOS |
100% | - | - |
a) Company liquidated on 18 January 2016.
| COMPANY | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| HEADQUARTERS | ACTIVITY | SHARE HOLDER |
EFFECTIVE | DIRECT | EFFECTIVE | |
| 31-12-2015 | 31-03-2016 | 31-03-2016 | ||||
| Big Picture 2 Films, S.A. | Oeiras | Import, distribution, commercialization and production of audiovisual products |
NOS Audiovisuais |
20.00% | 20.00% | 20.00% |
| Canal 20 TV, S.A. | Madrid | Production, distribution and sale of contents rights for television films |
NOS | 50.00% | 50.00% | 50.00% |
| COMPANY | PERCENTAGE OF OWNERSHIP | |||||
|---|---|---|---|---|---|---|
| HEADQUARTERS | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE | |
| HOLDER | 31-12-2015 | 31-03-2016 | 31-03-2016 | |||
| Dreamia Holding B.V. | Amsterdam Management of investments | NOS Audiovisuais |
50.00% | 50.00% | 50.00% | |
| Dreamia - Serviços de Televisão, S.A. | Lisbon | Conception, production, realization and commercialization of audiovisual contents and provision of publicity services |
Dreamia Holding BV |
50.00% | 100.00% | 50.00% |
| East Star Ltd | Port Louis | Management of investments involved in the development, operation and marketing, through any technological means, of telecommunications, television and audiovisual products and services |
Teliz Holding B.V. |
30.00% | 30.00% | 30.00% |
| FINSTAR - Sociedade de Investimentos e Participações, S.A. |
Luanda | Distribution of television by satellite, operation of telecommunications services |
Teliz Holding B.V. |
30.00% | 30.00% | 30.00% |
| MSTAR, SA | Maputo | Distribution of television by satellite, operation of telecommunications services |
NOS | 30.00% | 30.00% | 30.00% |
| Sport TV Portugal, S.A. | Lisbon | Conception, production, realization and commercialization of sports programs for telebroadcasting, purchase and resale of the rights to broadcast sports programs for television and provision of publicity services |
NOS | 50.00% | 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 | 30.00% | 100.00% | 30.00% |
| ZAP Publishing, S.A. | Luanda | Projects development and activities in the areas of entertainment, telecommunications and related technologies, the production and distribution of the contents and the design, implementation and operation of infrastructure and related facilities |
ZAP Media | 30.00% | 100.00% | 30.00% |
Financial investments whose participation is less than 50% were considered as joint arrangements due to shareholder agreements that confer joint control.
| PERCENTAGE OF OWNERSHIP | ||||||
|---|---|---|---|---|---|---|
| COMPANY | HEADQUARTERS | ACTIVITY | SHARE | EFFECTIVE | DIRECT | EFFECTIVE |
| HOLDER | 31-12-2015 | 31-03-2016 | 31-03-2016 | |||
| Turismo da Samba (Tusal), SARL (a) | Luanda | n.a. | NOS | 30.00% | 30.00% | 30.00% |
| Filmes Mundáfrica, SARL (a) | Luanda | Movies exhibition | NOS | 23.91% | 23.91% | 23.91% |
| Companhia de Pesca e Comércio de Angola (Cosal), SARL (a) |
Luanda | n.a. | NOS | 15.76% | 15.76% | 15.76% |
| Caixanet – Telecomunicações e 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% |
a) The financial investments in these companies are fully provisioned.
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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