UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2015
Commission File Number: 001-14475
TELEFÔNICA BRASIL S.A.
(Exact name of registrant as specified in its charter)
TELEFONICA BRAZIL S.A.
(Translation of registrant’s name into English)
Av. Eng° Luís Carlos Berrini, 1376 - 28º andar
São Paulo, S.P.
Federative Republic of Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F |
X |
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Form 40-F |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes |
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No |
X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes |
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No |
X |
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Condomínio São Luiz Av. Presidente Juscelino Kubitschek, 1830 Torre I - 8º Andar - Itaim Bibi 04543-900 - São Paulo - SP - Brasil
Tel: (5511) 2573-3000 ey.com.br |
A free translation from Portuguese into English of Independent Auditor’s Report on interim financial information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)
The Shareholders, Board of Directors and Officers
Telefônica Brasil S.A.
São Paulo - SP
We have reviewed the individual and consolidated interim financial information of Telefônica Brasil S.A., (“Company”), contained in the Quarterly Information Form (Informações Trimestrais - ITR) for the period ended on September 30, 2015, which comprise the balance sheet as at September 30, 2015 and the related statements of income and of comprehensive income for the three-month and nine-month period ended on September 30, 2015, and changes in equity and of cash flows for the nine-month period then ended, including other explanatory information. Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Accounting Standard CPC 21 (R1) Interim Financial Reporting (Demonstração Intermediaria) and with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of this information in conformity with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the individual and consolidated interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the Quarterly Information Form (ITR) referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of the Quarterly Information Form (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM).
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Condomínio São Luiz Av. Presidente Juscelino Kubitschek, 1830 Torre I - 8º Andar - Itaim Bibi 04543-900 - São Paulo - SP - Brasil
Tel: (5511) 2573-3000 ey.com.br |
Other matters
Statements of value added
We have also reviewed the individual and consolidated interim Value Added Statement for the nine-month period ended on September 30, 2015, prepared under management’s responsibility, whose presentation in the interim financial information is required by rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of the Quarterly Information Form (ITR), and as supplementary information under IFRS, which do not require Value Added Statement presentation. This statement has been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that it is not fairly presented, in all material respects, in relation to the overall accompanying interim financial information.
Audit of the balance sheet as of December 31, 2014 and review of the interim statements of income and of comprehensive income for three-month and nine-months period ended on September 30, 2014, and statements of changes in equity and of cash flows for the nine-month period ended on September 30, 2014.
The balance sheet as of December 31, 2014, presented for comparison purposes, was previously audited by other independent auditors, who issued an unmodified report dated February 12, 2015. In addition, the interim statements of income and of comprehensive income for three-month and nine-month period ended on September 30, 2014, and statements of changes in equity, of cash flows and of value added for the nine-month period ended September 30, 2014, presented for comparison purposes, were reviewed by other independent auditors, who issued an unmodified report dated November 10, 2014.
São Paulo, November 4, 2015
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Cássio de Oliveira Barbosa Accountant CRC-1SP269018/O-7 |
Héctor Ezequiel Rodríguez Padilla Accountant CRC-1SP299427/O-9 |
TELEFÔNICA BRASIL S. A. | ||||||||||||||||||||
Balance sheets | ||||||||||||||||||||
September 30, 2015 and December 31, 2014 | ||||||||||||||||||||
(In thousands of reais) | ||||||||||||||||||||
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Company |
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Consolidated |
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Company |
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Consolidated | ||||||||
ASSETS |
Note |
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09.30.15 |
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12.31.14 |
|
09.30.15 |
|
12.31.14 |
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LIABILITIES AND EQUITY |
Note |
|
09.30.15 |
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12.31.14 |
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09.30.15 |
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12.31.14 |
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Current assets |
|
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16,072,988 |
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14,754,381 |
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19,033,030 |
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15,517,368 |
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Current liabilities |
|
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16,713,652 |
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16,102,171 |
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20,543,719 |
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16,011,006 |
Cash and cash equivalents |
4 |
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5,293,875 |
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3,835,304 |
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6,315,241 |
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4,692,689 |
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Personnel, charges and social benefits |
14 |
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517,996 |
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585,770 |
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717,041 |
|
591,381 |
Trade accounts receivable, net |
5 |
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6,879,814 |
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6,470,764 |
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8,169,311 |
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6,724,061 |
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Trade accounts payable |
15 |
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7,302,315 |
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7,675,632 |
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8,001,500 |
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7,641,191 |
Inventories |
6 |
|
597,249 |
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458,488 |
|
647,151 |
|
479,801 |
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Taxes, rates and contributions |
16 |
|
1,047,733 |
|
1,236,330 |
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1,503,420 |
|
1,281,673 |
Dividends and Interest on Equity (IOE) |
17 |
|
- |
|
174,726 |
|
- |
|
- |
|
Dividends and Interest on Equity (IOE) |
17 |
|
3,591,124 |
|
1,495,321 |
|
3,591,124 |
|
1,495,321 |
Prepaid expenses |
9 |
|
499,012 |
|
300,567 |
|
542,909 |
|
303,551 |
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Provisions and contingencies |
18 |
|
845,473 |
|
674,276 |
|
863,563 |
|
674,276 |
Taxes recoverable |
7.1 |
|
1,968,971 |
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2,163,404 |
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2,224,794 |
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2,202,662 |
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Deferred revenues |
19 |
|
600,128 |
|
704,589 |
|
604,072 |
|
717,019 |
Judicial deposits and garnishments |
8 |
|
211,098 |
|
202,169 |
|
211,098 |
|
202,169 |
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Loans, financing, finance lease and contingent consideration |
20 |
|
683,725 |
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1,509,471 |
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3,136,950 |
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1,509,471 |
Derivative transactions |
33 |
|
83,351 |
|
613,939 |
|
507,734 |
|
613,939 |
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Debentures |
20 |
|
776,598 |
|
755,047 |
|
776,598 |
|
755,047 |
Other assets |
10 |
|
539,618 |
|
535,020 |
|
414,792 |
|
298,496 |
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Derivative transactions |
33 |
|
33,361 |
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23,011 |
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33,361 |
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23,011 |
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Other liabilities |
21 |
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1,315,199 |
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1,442,724 |
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1,316,090 |
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1,322,616 |
Noncurrent assets |
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80,339,746 |
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58,382,747 |
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83,174,797 |
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57,547,920 |
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Short-term investments pledged as collateral |
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94,162 |
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125,343 |
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113,031 |
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125,353 |
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Noncurrent liabilities |
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12,295,883 |
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12,084,862 |
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14,260,909 |
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12,104,187 |
Trade accounts receivable, net |
5 |
|
237,528 |
|
190,288 |
|
352,191 |
|
299,405 |
|
Personnel, charges and social benefits |
14 |
|
22,214 |
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118,829 |
|
22,244 |
|
118,829 |
Taxes recoverable |
7.1 |
|
348,930 |
|
340,205 |
|
409,643 |
|
340,205 |
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Taxes, rates and contributions |
16 |
|
57,545 |
|
41,379 |
|
87,343 |
|
67,126 |
Deferred taxes |
7.2 |
|
24,393 |
|
40,704 |
|
459,431 |
|
144,817 |
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Provisions and contingencies |
18 |
|
4,898,317 |
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4,440,756 |
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5,580,586 |
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4,461,654 |
Prepaid expenses |
9 |
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27,539 |
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24,346 |
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29,315 |
|
26,223 |
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Deferred revenues |
19 |
|
443,358 |
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480,957 |
|
443,940 |
|
482,782 |
Judicial deposits and garnishments |
8 |
|
4,786,990 |
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4,514,783 |
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5,397,777 |
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4,543,056 |
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Loans, financing, finance lease and contingent consideration |
20 |
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2,231,464 |
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2,123,126 |
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3,409,969 |
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2,123,126 |
Derivative transactions |
33 |
|
277,777 |
|
152,843 |
|
277,777 |
|
152,843 |
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Debentures |
20 |
|
3,419,731 |
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3,411,616 |
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3,419,731 |
|
3,411,616 |
Other assets |
10 |
|
67,217 |
|
94,703 |
|
73,262 |
|
94,925 |
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Derivative transactions |
33 |
|
36,780 |
|
24,133 |
|
36,780 |
|
24,133 |
Investments |
11 |
|
22,888,389 |
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1,445,014 |
|
105,537 |
|
79,805 |
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Post-employment benefit plan obligations |
32 |
|
489,731 |
|
456,129 |
|
489,731 |
|
456,129 |
Property and equipment, net |
12 |
|
21,349,788 |
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20,381,731 |
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30,624,916 |
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20,453,864 |
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Other liabilities |
21 |
|
696,743 |
|
987,937 |
|
770,585 |
|
958,792 |
Intangible assets, net |
13 |
|
30,237,033 |
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31,072,787 |
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45,331,917 |
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31,287,424 |
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Equity |
|
|
67,403,199 |
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44,950,095 |
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67,403,199 |
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44,950,095 |
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Capital |
22 |
|
63,571,416 |
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37,798,110 |
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63,571,416 |
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37,798,110 |
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Premium on acquisition of noncontrolling interests |
22 |
|
(70,448) |
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(70,448) |
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(70,448) |
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(70,448) |
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Capital reserves |
22 |
|
1,343,797 |
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2,686,897 |
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1,343,797 |
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2,686,897 |
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Income reserves |
22 |
|
1,537,441 |
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1,534,479 |
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1,537,441 |
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1,534,479 |
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Retained earnings |
22 |
|
1,001,361 |
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- |
|
1,001,361 |
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- |
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Proposed additional dividend |
22 |
|
- |
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2,768,592 |
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- |
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2,768,592 |
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Other comprehensive income |
22 |
|
19,632 |
|
232,465 |
|
19,632 |
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232,465 |
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TOTAL ASSETS |
|
|
96,412,734 |
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73,137,128 |
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102,207,827 |
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73,065,288 |
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TOTAL LIABILITIES AND EQUITY |
|
|
96,412,734 |
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73,137,128 |
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102,207,827 |
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73,065,288 |
TELEFÔNICA BRASIL S. A. | |||||||||||||||||
Income Statements | |||||||||||||||||
Three and nine-month periods ended September 30, 2015 and 2014 | |||||||||||||||||
(In thousands of reais) | |||||||||||||||||
Company |
Consolidated | ||||||||||||||||
Three-month period ended |
Nine-month period ended |
Three-month period ended |
Nine-month period ended | ||||||||||||||
Note |
09.30.15 |
09.30.14 |
09.30.15 |
09.30.14 |
09.30.15 |
09.30.14 |
09.30.15 |
09.30.14 | |||||||||
Net operating revenue |
23 |
8,536,988 |
8,190,690 |
25,373,145 |
24,508,982 |
10,580,780 |
8,723,915 |
29,525,983 |
25,952,439 | ||||||||
Cost of sales and services |
24 |
(4,315,136) |
(4,041,900) |
(12,907,993) |
(12,123,661) |
(5,381,782) |
(4,293,624) |
(14,987,070) |
(12,806,037) | ||||||||
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Gross profit |
4,221,852 |
4,148,790 |
12,465,152 |
12,385,321 |
5,198,998 |
4,430,291 |
14,538,913 |
13,146,402 | |||||||||
Operating income (expenses) |
(3,294,603) |
(3,175,777) |
(9,812,162) |
(9,383,068) |
(3,864,487) |
(3,193,297) |
(10,786,600) |
(9,433,499) | |||||||||
Selling expenses |
24 |
(2,759,439) |
(2,587,396) |
(8,128,580) |
(7,625,313) |
(3,193,538) |
(2,608,272) |
(8,875,775) |
(7,685,284) | ||||||||
General and administrative expenses |
24 |
(395,064) |
(464,403) |
(1,272,797) |
(1,393,564) |
(488,001) |
(470,815) |
(1,449,255) |
(1,414,337) | ||||||||
Other operating income |
25 |
160,446 |
122,890 |
404,158 |
347,722 |
178,767 |
127,417 |
439,224 |
375,279 | ||||||||
Other operating expenses |
25 |
(300,546) |
(246,868) |
(814,943) |
(711,913) |
(361,715) |
(241,627) |
(900,794) |
(709,157) | ||||||||
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|
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| ||||||||||
Operating income |
927,249 |
973,013 |
2,652,990 |
3,002,253 |
1,334,511 |
1,236,994 |
3,752,313 |
3,712,903 | |||||||||
Financial revenues |
26 |
301,578 |
298,371 |
976,982 |
503,506 |
990,715 |
331,789 |
1,700,435 |
563,527 | ||||||||
Financial expenses |
26 |
(428,578) |
(409,702) |
(1,296,533) |
(856,068) |
(1,249,255) |
(408,181) |
(2,348,354) |
(840,297) | ||||||||
Equity pickup |
11 |
180,783 |
202,400 |
508,235 |
525,753 |
797 |
5,043 |
1,469 |
6,502 | ||||||||
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|
|
|
|
|
|
| ||||||||||
Income before taxes |
981,032 |
1,064,082 |
2,841,674 |
3,175,444 |
1,076,768 |
1,165,645 |
3,105,863 |
3,442,635 | |||||||||
Income and social contribution taxes |
27 |
(94,867) |
(41,757) |
(505,974) |
500,304 |
(190,603) |
(143,320) |
(770,163) |
233,113 | ||||||||
Net income for the period |
886,165 |
1,022,325 |
2,335,700 |
3,675,748 |
886,165 |
1,022,325 |
2,335,700 |
3,675,748 | |||||||||
Basic and diluted earnings per share (in R$) |
|||||||||||||||||
Common shares |
28 |
0.49 |
0.85 |
1.54 |
3.07 |
||||||||||||
Preferred shares |
28 |
0.54 |
0.94 |
1.69 |
3.38 |
TELEFÔNICA BRASIL S.A. | |||||||||||||||||||||
Statements of changes in equity | |||||||||||||||||||||
Nine-month periods ended September 30, 2015 and 2014 | |||||||||||||||||||||
(In thousands of reais) | |||||||||||||||||||||
Capital reserves |
Income reserves |
||||||||||||||||||||
Capital |
Premium on acquisition of noncontrolling interests |
Special goodwill reserve |
Other capital reserves |
Treasury stock |
Legal reserve |
Tax incentives |
Retained earnings |
Proposed additional dividend |
Other comprehensive income |
Company’s equity | |||||||||||
Balances at December 31, 2013 |
37,798,110 |
(70,448) |
63,074 |
2,735,930 |
(112,107) |
1,285,797 |
1,699 |
- |
1,175,538 |
16,849 |
42,894,442 | ||||||||||
Proposed additional dividend for 2013 |
- |
- |
- |
- |
- |
- |
- |
- |
(1,175,538) |
- |
(1,175,538) | ||||||||||
Unclaimed dividends and interest on equity |
- |
- |
- |
- |
- |
- |
- |
109,518 |
- |
- |
109,518 | ||||||||||
Corporate Income Tax Return (DIPJ) adjustment - tax incentives |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- | ||||||||||
Other comprehensive income |
- |
- |
- |
- |
- |
- |
- |
- |
- |
24,356 |
24,356 | ||||||||||
Net income for the period |
- |
- |
- |
- |
- |
- |
- |
3,675,748 |
- |
- |
3,675,748 | ||||||||||
Interim interest on equity |
- |
- |
- |
- |
- |
- |
- |
(847,552) |
- |
- |
(847,552) | ||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balances at September 30, 2014 |
37,798,110 |
(70,448) |
63,074 |
2,735,930 |
(112,107) |
1,285,797 |
1,699 |
2,937,714 |
- |
41,205 |
44,680,974 | ||||||||||
Proposed additional dividend for 2013 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- | ||||||||||
Unclaimed dividends and interest on equity |
- |
- |
- |
- |
- |
- |
- |
97,924 |
- |
- |
97,924 | ||||||||||
Corporate Income Tax Return (DIPJ) adjustment - tax incentives |
- |
- |
- |
- |
- |
- |
150 |
(150) |
- |
- |
- | ||||||||||
Other comprehensive income |
- |
- |
- |
- |
- |
- |
- |
(36,526) |
- |
191,260 |
154,734 | ||||||||||
Net income for the period |
- |
- |
- |
- |
- |
- |
- |
1,260,911 |
- |
- |
1,260,911 | ||||||||||
Allocation of income: |
|||||||||||||||||||||
Legal reserve |
- |
- |
- |
- |
- |
246,833 |
- |
(246,833) |
- |
- |
- | ||||||||||
Interim interest on equity |
- |
- |
- |
- |
- |
- |
- |
(1,244,448) |
- |
- |
(1,244,448) | ||||||||||
Interim dividends |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- | |||||||||||
Proposed additional dividend |
- |
- |
- |
- |
- |
- |
- |
(2,768,592) |
2,768,592 |
- |
- | ||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balances at December 31, 2014 |
37,798,110 |
(70,448) |
63,074 |
2,735,930 |
(112,107) |
1,532,630 |
1,849 |
- |
2,768,592 |
232,465 |
44,950,095 | ||||||||||
Proposed additional dividend for 2014 |
- |
- |
- |
- |
- |
- |
- |
- |
(2,768,592) |
- |
(2,768,592) | ||||||||||
Unclaimed dividends and interest on equity |
- |
- |
- |
- |
- |
- |
- |
58,623 |
- |
- |
58,623 | ||||||||||
Corporate Income Tax Return (DIPJ) adjustment - tax incentives |
- |
- |
- |
- |
- |
- |
2,962 |
(2,962) |
- |
- |
- | ||||||||||
Cancelation of treasury stock, according to the Special Shareholders' Meeting held on 03/12/15 |
- |
- |
- |
(112,107) |
112,107 |
- |
- |
- |
- |
- |
- | ||||||||||
Capital increase - Special Shareholders’ Meeting held on 04/28/15 |
15,812,000 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
15,812,000 | ||||||||||
Direct costs on capital increases (net of taxes), according to the Special Shareholders' Meeting held on 04/30/15 |
- |
- |
- |
(62,812) |
- |
- |
- |
- |
- |
- |
(62,812) | ||||||||||
Capital increase - Special Shareholders’ Meeting held on 04/30/15 |
295,285 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
295,285 | ||||||||||
Direct costs on capital increases (net of taxes), according to the Special Shareholders' Meeting held on 04/30/15 |
- |
- |
- |
(3,776) |
- |
- |
- |
- |
- |
- |
(3,776) | ||||||||||
Capital increase - Merger of GVTPart shares - Special Shareholders’ Meeting held on 05/28/15 |
9,666,021 |
- |
- |
(1,188,707) |
- |
- |
- |
- |
- |
- |
8,477,314 | ||||||||||
Dissenters' right - Acquisition of GVTPart. |
- |
- |
- |
- |
(87,805) |
- |
- |
- |
- |
- |
(87,805) | ||||||||||
Other comprehensive income |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(212,833) |
(212,833) | ||||||||||
Net income for the period |
- |
- |
- |
- |
- |
- |
- |
2,335,700 |
- |
- |
2,335,700 | ||||||||||
Interim interest on equity |
- |
- |
- |
- |
- |
- |
- |
(1,120,000) |
- |
- |
(1,120,000) | ||||||||||
Interim dividends |
- |
- |
- |
- |
- |
- |
- |
(270,000) |
- |
- |
(270,000) | ||||||||||
Balances at September 30, 2015 |
63,571,416 |
(70,448) |
63,074 |
1,368,528 |
(87,805) |
1,532,630 |
4,811 |
1,001,361 |
- |
19,632 |
67,403,199 | ||||||||||
Outstanding shares (in thousands) |
1,688,694 | ||||||||||||||||||||
VPA - Equity value of Company’s shares (in R$) |
39.91 |
TELEFÔNICA BRASIL S. A. | |||||||||||||||
Statements of comprehensive income (loss) | |||||||||||||||
Three and nine-month periods ended September 30, 2015 and 2014 | |||||||||||||||
(In thousands of reais) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Consolidated | ||||||||||||
|
Three-month period ended |
|
Nine-month period ended |
|
Three-month period ended |
|
Nine-month period ended | ||||||||
|
09.30.15 |
|
09.30.14 |
|
09.30.15 |
|
09.30.14 |
|
09.30.15 |
|
09.30.14 |
|
09.30.15 |
|
09.30.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period |
886,165 |
|
1,022,325 |
|
2,335,700 |
|
3,675,748 |
|
886,165 |
|
1,022,325 |
|
2,335,700 |
|
3,675,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investments available for sale |
(854) |
|
(607) |
|
(1,637) |
|
(5,178) |
|
(854) |
|
(607) |
|
(1,637) |
|
(5,178) |
Taxes |
291 |
|
206 |
|
557 |
|
1,760 |
|
291 |
|
206 |
|
557 |
|
1,760 |
|
(563) |
|
(401) |
|
(1,080) |
|
(3,418) |
|
(563) |
|
(401) |
|
(1,080) |
|
(3,418) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative transactions |
(22,757) |
|
45,829 |
|
(359,932) |
|
47,423 |
|
(22,719) |
|
45,829 |
|
(359,779) |
|
47,423 |
Taxes |
7,737 |
|
(15,582) |
|
122,377 |
|
(16,124) |
|
7,737 |
|
(15,582) |
|
122,377 |
|
(16,124) |
|
(15,020) |
|
30,247 |
|
(237,555) |
|
31,299 |
|
(14,982) |
|
30,247 |
|
(237,402) |
|
31,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustments (CTA) on transactions in foreign currency |
20,690 |
|
1,604 |
|
25,900 |
|
(3,525) |
|
20,690 |
|
1,604 |
|
25,900 |
|
(3,525) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net to be reclassified to P&L in subsequent periods |
5,107 |
|
31,450 |
|
(212,735) |
|
24,356 |
|
5,145 |
|
31,450 |
|
(212,582) |
|
24,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
- |
|
- |
|
- |
|
- |
|
444 |
|
- |
|
(251) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest held in comprehensive income of subsidiaries |
482 |
|
- |
|
(98) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net to be reclassified to P&L in subsequent periods |
482 |
|
- |
|
(98) |
|
- |
|
444 |
|
- |
|
(251) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income for the period, net of taxes |
891,754 |
|
1,053,775 |
|
2,122,867 |
|
3,700,104 |
|
891,754 |
|
1,053,775 |
|
2,122,867 |
|
3,700,104 |
TELEFÔNICA BRASIL S. A. | |||||||
Cash flow statements | |||||||
Nine-month periods ended September 30, 2015 and 2014 | |||||||
(In thousands of reais) | |||||||
Company |
Consolidated | ||||||
Six-month period ended | |||||||
09.30.15 |
09.30.14 |
09.30.15 |
09.30.14 | ||||
Net cash from operating activities |
4,537,291 |
5,345,267 |
5,847,915 |
6,425,719 | |||
Expenses (revenue) not representing changes in cash |
9,175,286 |
8,277,110 |
11,292,129 |
9,048,020 | |||
Income before taxes |
2,841,674 |
3,175,444 |
3,105,863 |
3,442,635 | |||
Depreciation and amortization |
4,219,008 |
3,926,696 |
4,944,926 |
3,942,954 | |||
Exchange gains (losses) on loans |
(62,384) |
63,930 |
238,939 |
63,930 | |||
Monetary gains |
212,673 |
21,979 |
202,798 |
(9,191) | |||
Equity pickup |
(508,235) |
(525,753) |
(1,469) |
(6,502) | |||
Losses on write-off/disposal of assets |
32,727 |
42,782 |
42,742 |
41,329 | |||
Estimated impairment losses on accounts receivable |
824,644 |
613,146 |
958,588 |
658,832 | |||
(Reversal of) provision for trade accounts payable |
328,489 |
26,311 |
381,192 |
(14,968) | |||
Write-offs and reversals for impairment of realizable value of inventories |
(21,823) |
(12,641) |
(23,431) |
(16,218) | |||
Private pension plans and other post-employment benefits |
32,392 |
23,643 |
32,380 |
23,633 | |||
Provisions for tax, civil, labor and regulatory contingencies |
653,119 |
376,990 |
707,952 |
377,003 | |||
Interest expenses |
576,612 |
530,937 |
649,997 |
530,937 | |||
Other |
46,390 |
13,646 |
51,652 |
13,646 | |||
Changes in operating assets and liabilities: |
(4,637,995) |
(2,931,843) |
(5,444,214) |
(2,622,301) | |||
Trade accounts receivable |
(1,280,934) |
(1,242,136) |
(1,509,246) |
(1,275,898) | |||
Inventories |
(116,938) |
(16,698) |
(139,278) |
2,388 | |||
Taxes recoverable |
(213,381) |
86,748 |
(280,487) |
75,677 | |||
Prepaid expenses |
(91,973) |
(99,078) |
(74,684) |
(98,399) | |||
Other current assets |
(13,437) |
(407,548) |
(114,917) |
48,688 | |||
Other noncurrent assets |
(136,204) |
(12,539) |
(164,467) |
(14,979) | |||
Personnel, charges and social benefits |
(164,389) |
85,961 |
(141,914) |
85,790 | |||
Trade accounts payable |
(531,189) |
(231,809) |
(703,872) |
(110,299) | |||
Taxes, charges and contributions |
(95,669) |
313,258 |
(14,609) |
312,747 | |||
Interest paid |
(616,149) |
(607,079) |
(689,452) |
(607,079) | |||
Income and social contribution taxes paid |
- |
(520,740) |
(321,668) |
(705,397) | |||
Other current liabilities |
(917,984) |
(337,686) |
(838,822) |
(362,595) | |||
Other noncurrent liabilities |
(459,748) |
57,503 |
(450,798) |
27,055 | |||
Net cash from investing activities |
(16,073,619) |
(4,340,756) |
(13,069,439) |
(4,331,560) | |||
Acquisitions of property and equipment and intangible assets (net of donations) |
(4,486,329) |
(4,217,506) |
(5,088,440) |
(4,238,807) | |||
Cash from disposal of property and equipment |
16,054 |
12,065 |
16,268 |
13,060 | |||
Acquisition of company, net of cash and cash equivalents acquired in the amount of R$399,241 |
(8,903,954) |
- |
(8,504,713) |
- | |||
Capital increase in subsidiary |
(4,087,040) |
- |
- |
- | |||
Other |
- |
- |
(172,010) |
- | |||
Redemption (realization) of judicial deposits |
6,044 |
(136,455) |
(3,247) |
(106,953) | |||
Dividends and interest on equity received |
698,911 |
1,140 |
8 |
1,140 | |||
Net payment of derivative agreements in the acquisition of company |
682,695 |
- |
682,695 |
- | |||
Net cash from financing activities |
12,994,899 |
(2,260,753) |
8,844,076 |
(2,260,753) | |||
Payments of loans and financing and debentures |
(1,441,261) |
(714,493) |
(5,802,015) |
(714,493) | |||
Loans taken out and debentures acquired |
12,580 |
262,320 |
12,580 |
262,320 | |||
Net payment of derivative agreements |
332,897 |
(55,770) |
542,828 |
(55,770) | |||
Payments referring to reverse split of shares |
(143) |
(198) |
(143) |
(198) | |||
Capital increase |
16,107,285 |
- |
16,107,285 |
- | |||
Direct costs for capital increase |
(86,758) |
- |
(86,758) |
- | |||
Dissenters' right |
(87,805) |
- |
(87,805) |
- | |||
Dividends and interest on equity paid |
(1,841,896) |
(1,752,612) |
(1,841,896) |
(1,752,612) | |||
Total cash (provided by) used in financing activities |
12,994,899 |
(2,260,753) |
8,844,076 |
(2,260,753) | |||
Increase (decrease) in cash and cash equivalents |
1,458,571 |
(1,256,242) |
1,622,552 |
(166,594) | |||
Cash and cash equivalents at beginning of period |
3,835,304 |
6,311,299 |
4,692,689 |
6,543,936 | |||
Cash and cash equivalents at end of period |
5,293,875 |
5,055,057 |
6,315,241 |
6,377,342 | |||
Changes in cash and cash equivalents for the period |
1,458,571 |
(1,256,242) |
1,622,552 |
(166,594) |
TELEFÔNICA BRASIL S. A. | |||||||
Statements of value added | |||||||
Nine-month periods ended September 30, 2015 and 2014 | |||||||
(In thousands of reais) | |||||||
Company |
Consolidated | ||||||
Six-month period ended | |||||||
09.30.15 |
09.30.14 |
09.30.15 |
09.30.14 | ||||
Revenues |
34,488,318 |
33,336,040 |
39,859,025 |
35,074,118 | |||
Sales of goods and services |
34,787,087 |
33,465,912 |
39,962,840 |
35,222,119 | |||
Other revenues |
525,875 |
483,274 |
854,773 |
510,831 | |||
Estimated impairment losses on accounts receivable |
(824,644) |
(613,146) |
(958,588) |
(658,832) | |||
Inputs acquired from third parties |
(13,616,249) |
(13,394,536) |
(15,531,835) |
(14,166,873) | |||
Cost of sales and services |
(7,363,586) |
(7,359,385) |
(8,827,999) |
(8,106,739) | |||
Materials, electric energy, third-party services and other |
(6,246,031) |
(6,009,595) |
(6,686,192) |
(6,039,609) | |||
Loss/recovery of assets |
(6,632) |
(25,556) |
(17,644) |
(20,525) | |||
|
|
|
| ||||
Gross value added |
20,872,069 |
19,941,504 |
24,327,190 |
20,907,245 | |||
Retentions |
(4,219,008) |
(3,926,696) |
(4,944,926) |
(3,942,954) | |||
Depreciation and amortization |
(4,219,008) |
(3,926,696) |
(4,944,926) |
(3,942,954) | |||
|
|
|
| ||||
Net value added produced |
16,653,061 |
16,014,808 |
19,382,264 |
16,964,291 | |||
Value added received in transfer |
1,485,217 |
1,029,259 |
1,701,904 |
570,029 | |||
Equity pickup |
508,235 |
525,753 |
1,469 |
6,502 | |||
Financial revenues |
976,982 |
503,506 |
1,700,435 |
563,527 | |||
|
|
|
| ||||
Total value added to be distributed |
18,138,278 |
17,044,067 |
21,084,168 |
17,534,320 | |||
Distribution of value added |
(18,138,278) |
(17,044,067) |
(21,084,168) |
(17,534,320) | |||
Personnel, charges and social benefits |
(2,045,579) |
(1,955,549) |
(2,548,140) |
(1,972,749) | |||
Direct compensation |
(1,443,751) |
(1,356,247) |
(1,810,336) |
(1,368,024) | |||
Benefits |
(505,003) |
(501,541) |
(617,991) |
(505,999) | |||
Unemployment Compensation Fund (FGTS) |
(96,825) |
(97,761) |
(119,813) |
(98,726) | |||
Taxes, rates and contributions |
(10,984,501) |
(9,234,913) |
(12,219,756) |
(9,719,979) | |||
Federal |
(3,486,553) |
(2,261,638) |
(4,067,893) |
(2,663,678) | |||
State |
(7,445,828) |
(6,926,238) |
(8,011,626) |
(6,934,745) | |||
Municipal |
(52,120) |
(47,037) |
(140,237) |
(121,556) | |||
Debt remuneration |
(2,772,498) |
(2,177,857) |
(3,980,572) |
(2,165,844) | |||
Interest |
(1,245,530) |
(852,437) |
(2,298,714) |
(836,265) | |||
Leases |
(1,526,968) |
(1,325,420) |
(1,681,858) |
(1,329,579) | |||
Equity remuneration |
(2,335,700) |
(3,675,748) |
(2,335,700) |
(3,675,748) | |||
Retained profits |
(2,335,700) |
(3,675,748) |
(2,335,700) |
(3,675,748) |
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
1) OPERATIONS
a) Background information
Telefônica Brasil S.A. (“Company” or “Telefônica Brasil”) is a publicly-traded corporation operating in telecommunication services and in the performance of activities that are necessary or useful in the rendering of such services, in conformity with the concessions and authorizations it has been granted. The Company, headquartered at Avenida Engenheiro Luiz Carlos Berrini, No. 1376, in the city and State of São Paulo, Brazil, is a member of Telefónica Group (“Group”), the telecommunications industry leader in Spain, also present in various European and Latin American countries.
At September 30, 2015 and December 31, 2014, Telefónica S.A. (“Telefónica”), the Group holding company based in Spain, held a total direct and indirect interest in the Company (Note 22) of 73.58% and 73.81%, respectively (note 22).
The Company is listed in the Brazilian Securities and Exchange Commission (CVM) as a publicly-held company under Category A (issuers authorized to trade any marketable securities) and has shares traded on the São Paulo Stock Exchange (“BM&FBovespa”). The Company is also listed in the Securities and Exchange Commission (“SEC”), of the United States of America, and its American Depositary Shares (“ADSs”) are classified under level II, backed only by preferred shares and traded in the New York Stock Exchange (“NYSE”).
b) Operations
The Company is primarily engaged in rendering land-line telephone and data services in the state of São Paulo, under Fixed Switched Telephone Service Concession Arrangement (“STFC”) and Multimedia Communication Service (“SCM”) authorization, respectively. Also, the Company is authorized to render STFC services in Regions I and II of the General Service Concession Plan (“PGO”) and other telecommunications services, such as SCM (data communication, including broadband internet), SMP (Personal Communication Services) and SEAC (Conditional Access Audiovisual Services), especially by means of DTH and cable technologies.
Service concessions and authorizations are granted by Brazil’s Telecommunications Regulatory Agency (“ANATEL”), under the terms of Law No. 9472 of July 16, 1997 - General Telecommunications Law (“Lei Geral das Telecomunicações” - LGT), amended by Laws No. 9986 of July 18, 2000 and No. 12485 of September 12, 2011. Operation of such concessions is subject to supplementary regulations and plans.
b.1) STFC service concession arrangement
The Company is the grantee on an STFC concession to render land-line services in the local network and national long distance calls originated in sector 31 of Region III, which comprises the state of São Paulo (except for cities within sector 33), as established in the General Service Concession Plan (PGO).
In accordance with the service concession arrangement, every two years, during the arrangement’s 20-year term, the Company shall pay a fee equivalent to 2% of its prior-year STFC revenue, net of applicable taxes and social contribution taxes (Note 21).
The Company’s current STFC service concession arrangement is effective until December 31, 2025, and may be subject to reviews on December 31, 2015 and December 31, 2020.
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
Global Village Telecom S.A. (“GVT”), a wholly-owned subsidiary of GVT Participações S.A. (“GVTPart”), is engaged in the provision of STFC, SCM and pay-TV (SEAC) services throughout Brazil. ANATEL granted GVT the right to operate STFC in Region II of the PGO and a license to operate local and long-distance services in the Brazilian territory. In November 2006, GVT received the remaining licenses of STFC services for all of the Brazilian regions (the company was authorized to provide such services only in part of these regions). This granted the company the STFC license for the whole territory. GVT also has licenses to provide SCM and SEAC services in the entire Brazilian territory.
GVT is the controlling shareholder of POP Internet Ltda. (“POP”) and Innoweb Ltda. (“Innoweb”), Brazil-based entities operating in the telecommunications industry.
b.2) SMP authorization arrangement
The Company operates SMP services, in accordance with the authorizations it has been given. Frequency authorizations granted by ANATEL may be renewed only once, over a 15-year period, through payment, every two years after the first renewal, of fees equivalent to 2% of the Company’s prior-year revenue, net of taxes and social contribution taxes, related to the application of the Basic and Alternative Service Plans (Note 21).
The information on the areas of operation (regions) and due dates of the radiofrequency authorizations is the same of Note 1b2) – “SMP Authorization Arrangements”, as disclosed in the financial statements at December 31, 2014.
c) Agreement between Telefónica S.A. and Telecom Italia, S.p.A.
TELCO S.p.A. (“TELCO”) has a 22.4% interest with voting rights in Telecom Italia, S.p.A. (“Telecom Italia”), and is the majority shareholder of this company.
Telefónica S.A. holds an indirect control in Telefónica Brasil and Telecom Italia holds an indirect interest in TIM S.A. (“TIM”), a Brazilian telecommunications company. Neither Telefónica, nor Telefônica Brasil or any other affiliate of Telefónica interfere in, are involved with or have decision-making powers over TIM operations in Brazil, also being lawfully and contractually forbidden to exercise any type of political power derived from indirect interest in relation to TIM operations in Brazil. TIM (Brazil) and Telefônica Brasil compete in all markets in which they operate in Brazil under permanent competitive stress and, in this context, as well as in relation to the other economic players in the telecommunications industry, maintain usual and customary contractual relations with one another (many of which are regulated and inspected by ANATEL) and/or which, as applicable, are informed to ANATEL and Brazil’s Administrative Council for Economic Defense (CADE), concerning the commitments assumed before these agencies so as to ensure total independence of their operations.
On September 24, 2013, Telefónica S.A. entered into an agreement with the other shareholders of TELCO whereby Telefónica subscribed and paid up capital in TELCO through a contribution of 324 million euros, receiving shares without voting rights of TELCO as consideration. As a result of this capital increase, the share capital of Telefónica with voting rights in TELCO remained unchanged, although their economic participation rose to 66%. Thus, the governance of TELCO, as well as the obligations of Telefónica S.A. to abstain from participating in or influencing the decisions that impact the industries where they both operate, remained unchanged.
In the same document, the Italian shareholders of TELCO granted to Telefónica the option to acquire all TELCO’s shares, and such option is conditioned on prior competition defense and telecommunications approvals that are required (including in Brazil and Argentina).
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
On June 16, 2014, the Italian shareholders of TELCO decided to exercise their rights to request spin-off ensured by the Shareholders' Agreement of the company. This spin-off was approved by the Annual Shareholders’ Meeting of TELCO held on July 9, 2014, and was subject to prior authorization by relevant authorities, including CADE and ANATEL in Brazil.
On December 22, 2014 and March 12, 2015, ANATEL authorized TELCO’s spin-off, in a transaction impacting the swap transaction conducted with Vivendi S.A. (“Vivendi”), based on Rulings No. 429/2014-CD and No. 87/2015-CD, respectively. In the swap transaction agreed by and between Telefónica and Vivendi, Vivendi would exchange all its voting shares and part of its non-voting shares held in the Company for an indirect interest held by Telefónica in Telecom Italia (Note 3), subject to certain conditions, such as prohibiting Vivendi to increase its interest in the Company.
The 61st ordinary session of CADE’s Trial Court, held on March 25, 2015, approved TELCO’s spin-off and the swap transaction agreed upon between Telefónica and Vivendi, subject to the execution of three concentration control agreements.
On June 24, 2015, a stock swap operation was closed between Telefónica and Société d’Investissements et de Gestion 108 SAS (“FrHolding108”), whereby FrHolding108 would transfer shares to Telefónica, representing 4.5% of the Company’s capital, in exchange for 1,110,000,000 shares, representing 8.2% of the common shares of Telecom Italia, previously held by TELCO, a subsidiary of Telefónica (Note 22).
On July 29, 2015, after the New York Stock Exchange (NYSE) closed, Vivendi sold preferred shares of the Company, representing 4% of its capital. On that same date, the stock swap operation between Telefónica and FrHolding108 was completed. As such, as from that date, FrHolding108 has not held any share equity in the Company (Note 22).
d) Corporate Restructuring
The Company’s Special Meeting held on May 28, 2015, approved acquisition of all the shares issued by GVTPart. and 675,571 shares of GVT, as well as the incorporation of shares of GVTPart. by the Company. As a consequence of these acts, the Company became the sole shareholder of GVTPart. and indirect controlling company of GVT, Pop Internet Ltda. (“POP”) and Innoweb Ltda. (“Innoweb”) (Note 3).
After concluding the aforementioned stages, the Company’s Board of Directors’ meeting held on September 22, 2015 analyzed the proposal of Corporate Restructuring involving the Company, its wholly-owned subsidiary (GVTPart.) and its indirect subsidiaries (GVT and POP), in such a way that at the end of the process, the services rendered by GVT that are not classified as telecommunication services will be centralized by POP and telecommunication services will be centralized by the Company.
Considering that in the implementation of the Corporate Reorganization all the companies involved are wholly-owned subsidiary or indirect subsidiaries of the Company, there will not be right of retirement of the Company’s shareholders (on the terms of article 137 of Law No. 6404/76, as amended), since the operations provided for will not affect the shareholding structure and will not result in capital increase and issue of new shares of the Company.
The Corporate Restructuring will only be implemented after prior approval by ANATEL, which is in the phase of analysis.
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
2) BASIS OF PREPARATION AND PRESENTATION OF QUARTERLY INFORMATION
2.1) Statement of Compliance
The individual quarterly information (Company) was prepared and is presented in accordance with accounting practices adopted in Brazil, which comprise the rules issued by CVM, and with CPC 21 - Interim Financial Reporting, issued by the Brazilian FASB (CPC), which are in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB).
The consolidated quarterly information (Consolidated) was prepared and is presented in accordance with CPC 21 and IAS 34 – Interim Financial Reporting, issued by IASB, and CVM rules.
At a meeting held on October 21, 2015, the Executive Board authorized the issue of this quarterly information, which was ratified by the Board of Directors at a meeting held on November 4, 2015.
2.2) Basis of preparation and presentation
The Company’s Quarterly Information for the nine-month period ended September 30, 2015 is presented in thousands of reais (unless otherwise stated) and was prepared under a going concern assumption.
This quarterly information compares the quarters ended September 30, 2015 and 2014, except for balance sheets that compare the positions at September 30, 2015 and December 31, 2014.
As a result of the consolidation of GVTPart. (Note 3), as of May 1, 2015, the consolidated financial information as at September 30, 2015 is not comparable to the information as at December 31 and September 30, 2014.
This quarterly information was prepared pursuant to the accounting principles, practices and criteria consistent with those adopted in preparing the financial statements for the year ended December 31, 2014 (Note 3 – “Summary of Significant Accounting Practices”) and must be analyzed jointly with the referred to financial statements.
Certain accounts in the tables of these notes to quarterly information and the Statement of Value Added were reclassified so as to allow comparison of information for the nine-month periods ended September 30, 2015 and 2014, as applicable.
On the date of preparation of this quarterly information, the following IFRS amendments had been published; however, their application was not compulsory:
IFRS 9 Financial Instruments, issue of final version: This standard encompasses all phases of the financial instruments project and replaces IAS 39 – Financial Instruments: Recognition and Measurement and all prior versions of IFRS 9. It introduces new requirements for classification and measurement, impairment loss and hedge accounting. This standard is applicable as from the year beginning on January 1, 2018, and its early adoption is not permitted. Its retrospective application is required; however, the presentation of comparative information is not mandatory. Early adoption of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the initial application date falls before February 1, 2015. The adoption of IFRS 9 will impact the classification and measurement of the Company’s financial assets, but it will not impact the classification and measurement of its financial liabilities.
IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, revision: This standard determines the accounting treatment for transactions involving assets between an investor and its associates or joint ventures. This standard is applicable as from the year beginning on January 1, 2016. The Company does not expect any significant impacts on its financial position.
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
IFRS 10, 12 and IAS 28 Investment Entities: Applying the Consolidation Exception, revision: This standard addresses the requirements for financial statements disclosure for an investment entity. This standard is applicable for annual periods beginning on or after January 1, 2017. The Company does not expect any significant impacts on its financial position.
IFRS 11 Accounting for Acquisitions of Interests in Joint Operations, revision: The amendments to this standard require that a joint investor, which records the acquisition of interest in a joint operation that is a business, apply the relevant IFRS 3 principles applicable to business combination. The amendments further clarify that the interest previously held in a joint operation is not remeasured upon acquisition of additional interest in the same joint operation, while the joint control is held. In addition, a scope exclusion was added to IFRS 11 in order to specify that the amendments are not applicable when the parties sharing joint control, including the reporting entity, are under the common control of the main controlling party. The amendments apply both to the acquisition of final interest in a joint operation and the acquisition of any additional interest in the same joint operation, and are effective prospectively as from the year beginning on January 1, 2016. The Company does not expect significant impacts on its financial position.
IFRS 14 Regulatory Deferral Accounts, issue: This standard is optional and allows a company that conducts rate-regulated activities to continue applying most of its accounting policies on regulatory deferral account balances, upon first-time adoption of IFRS. The companies that adopt IFRS 14 must present regulatory deferral account balances as separate accounts in the balance sheets and in other comprehensive income. This standard requires disclosures on the nature and risks associated with company’s regulated rates and the effects of such regulation on the financial statements. This standard is applicable as from the year beginning on January 1, 2016. The Company does not expect any significant impacts on its financial position, since it has already been preparing its financial statements based on the effective IFRS.
IFRS 15 Revenue from Contracts with Customers, issue: This standard requires that an entity recognize revenue, reflecting the consideration expected to be received in exchange of the control over goods or services. When adopted, this standard will replace most part of the current guidance on revenue recognition (standards IAS 11, IAS 18, IFRIC 13, IFRC 15 and IFRIC 18). This standard is applicable as from the year beginning on January 1, 2018, and it may be adopted retrospectively, or using a cumulative effect approach. The Company is evaluating the impacts on its quarterly information and disclosures, and has neither defined the transition method nor determined the potential impacts on its financial reports yet.
IAS 1 Disclosure Initiative, review: This standard addresses changes in the overall financial statements of a company. This standard is applicable for annual periods beginning on or after January 1, 2016. The Company does not expect any significant impacts on its financial position.
IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization, revision: The amendments clarify the depreciation and amortization methods, subject to the alignment to the concept of future economic benefits expected from the use of assets over its economic useful life. This standard is applicable for annual periodsbeginning on or after January 1, 2016. The Company does not expect any significant impacts on its financial position.
The Company does not early adopt any pronouncement, interpretation or amendment which has been issued, but whose application is notmandatory.
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
2.3) Basis of consolidation
At September 30, 2015 and December 31, 2014, the Company held interest in the following companies:
|
|
|
|
Ownership interest (%) |
|
|
|
| ||
Investees |
|
Type of investment |
|
At 09.30.15 |
|
At 12.31.14 |
|
Country (head office) |
|
Business activity |
Telefônica Data S.A. ("TData") |
|
Wholly-owned subsidiary |
|
100.00% |
|
100.00% |
|
Brazil |
|
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
GVT Participações S.A. ("GVTPart.") (Note 3) |
|
Wholly-owned subsidiary |
|
100.00% |
|
- |
|
Brazil |
|
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
Aliança Atlântica Holging B.V. ("Aliança") |
|
Jointly-controlled subsidiary |
|
50.00% |
|
50.00% |
|
Netherlands |
|
Holding, operating in the telecommunications industry |
|
|
|
|
|
|
|
|
|
|
|
Companhia AIX de Participações ("AIX") |
|
Jointly-controlled subsidiary |
|
50.00% |
|
50.00% |
|
Brazil |
|
Underground telecommunications network |
|
|
|
|
|
|
|
|
|
|
|
Companhia ACT de Participações ("ACT") |
|
Jointly-controlled subsidiary |
|
50.00% |
|
50.00% |
|
Brazil |
|
Technical assistance in telecommunications network |
Interests held in subsidiaries or jointly-controlled entities are measured under the equity method in the individual quarterly information. In the consolidated quarterly information, investments and all asset and liability balances, revenues and expenses arising from transactions and interest held in subsidiaries are fully eliminated. Investments in jointly-controlled entities are measured under the equity method in the consolidated quarterly information.
3) ACQUISITION OF GVT PARTICIPAÇÕES S.A.
Pursuant to and for the purposes of CVM Rule No. 358/02, the Company informed the market that its Special Shareholders’ Meeting (“AGE”) held on May 28, 2015 approved the ratification of the Stock Purchase Agreement and Other Covenants executed by the Company, in the capacity of “Buyer”, and Vivendi and its subsidiaries (Société d’Investissements et de Gestion 108 SAS - “FrHolding108” and Société d’Investissements et de Gestion 72 S.A.), in the capacity of “Sellers”, whereby all the shares issued by GVTPart were acquired by the Company.
Payment for acquisition of GVTPart shares was made as follows:
· €4,663,000,000.00 paid in cash after contractual adjustments on the execution date; and
· Company-issued shares delivered to FRHolding108 as a result of the merger of GVTPart shares by the Company, representing 12% of the Company’s capital stock after the merger of shares.
As a result of the merger of GVTPart shares, the Company’s capital increased by R$9,666,021, with the issuance of 68,597,306 common shares and 134,320,885 preferred shares, all registered, no-par value shares, based on the economic value of merged shares calculated using the discounted cash flow method and on the appraisal report on GVTPart’s economic value prepared by an expert firm, in conformity with article 252, paragraph 1, together with article 8, of Law No. 6404/76. The difference between the economic value of merged shares and the market value of shares issued on the transaction closing date was recognized in “Other Capital Reserves”, in the amount of R$1,188,707.
This transaction was subject to obtaining of applicable corporate and regulatory approvals, including from CADE and ANATEL, further to other conditions usually applicable to this type of transaction. The transaction was approved by ANATEL under Act No. 448 of January 22, 2015 and published in the Federal Register (“DOU”) on January 26, 2015, and by CADE at the 61st ordinary session of its Trial Court, held on March 25, 2015, and published in the Federal Register (“DOU”) on March 31, 2015.
Once the acquisition transaction was completed on May 28, 2015, the Company has held direct interests in GVTPart and indirect interests in GVT. GVTPart. is headquartered in Brazil as its business purpose includes participation in other companies, whether national or foreign, as partner, shareholder or member. Its direct subsidiary (GVT) provides land-line telephone, data, multimedia communication and pay-TV services throughout the Brazilian territory.
Under IFRS 3 (R)/CPC 15 (R1) – Business Combinations, business acquisitions are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the fair value of assets transferred, the liabilities assumed at acquisition date from the former acquiree’s shareholders and equity interests issued in exchange for control over the acquiree.
Telefônica Brasil S. A.
NOTES TO QUARTERLY INFORMATION
Nine-month period ended September 30, 2015
(In thousands of reais, unless otherwise stated)
The acquisition price, as yet calculated on a preliminary basis, is shown below:
Gross consideration in cash (Euros 4,663 billion) |
|
15,964,853 |
(-) Contract Adjustment (Net Debt) (*) |
|
(7,060,899) |
Net consideration in cash |
|
8,903,954 |
(+) Contingent payment |
|
344,217 |
(+) Consideration in shares at fair value |
|
8,477,314 |
(-) Gains on cash flow hedge on transaction |
|
(377,373) |
Total consideration, net of cash flow hedge |
|
17,348,112 |
(*) Under review by an expert independent firm, as contractually defined.
Please find below a breakdown of the fair value of assets acquired for R$5,118,753, as well as goodwill recorded on the acquisition date. Additionally, we present detailed information on these fair value amounts allocated to each account, taking into consideration prior disclosure restatements, which is allowed for a period of twelve months as from acquisition date, in accordance which the accounting practices adopted.
Current assets |
1,566,636 |
|
Current liabilities |
5,274,876 |
Cash and cash equivalents |
399,241 |
|
Personnel, charges and social benefits |
170,989 |
Trade accounts receivable, net |
947,378 |
|
Trade accounts payable |
591,767 |
Inventories |
4,641 |
|
Taxes, rates and contributions |
341,503 |
Taxes recoverable |
147,057 |
|
Loans and financing |
3,968,553 |
Prepaid expenses |
58,101 |
|
Provisions |
17,866 |
Other assets |
10,218 |
|
Other liabilities |
184,198 |
|
|
|
|
|
Noncurrent assets |
12,609,860 |
|
Noncurrent liabilities |
3,782,867 |
Taxes recoverable |
65,797 |
|
Taxes, rates and contributions |
1,342 |
Deferred taxes (4) |
250,770 |
|
Loans and financing |
3,088,414 |
Judicial deposits and garnishments |
551,275 |