vivoitr1q16_6k.htm - Generated by SEC Publisher for SEC Filing

 

 

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 May, 2016

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

 

Form 40-F

 

 

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

 

 

No

 

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

 

 

No

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TELEFÔNICA BRASIL S.A.

 

 

QUARTERLY INFORMATION

 

MARCH 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 
 

 

 

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)



Independent auditor’s report on interim financial information

 

To 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 three-month period ended on March 31, 2016, which comprise the balance sheet as of March 31, 2016 and the related statements of income and of comprehensive income, the changes in equity and of cash flows for the three-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 Intermediária) issued by Comitê de Pronunciamentos Contábeis - CPC 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).

 

Page. 2


 
 
 

 

 

Other matters

 

Statements of value added

 

We have also reviewed the individual and consolidated interim Value Added Statement for the three-month period ended on March 31, 2016, prepared under management’s responsibility, whose presentation in the interim financial information is required by the 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.

 

 

São Paulo, April 25, 2016.

 

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

 

 

 

Luiz Carlos Passetti

Contador CRC-1SP144343/O-3

 

 

 

Page. 3


 
 
 

 

 

TELEFÔNICA BRASIL S.A.

Balance Sheets

At March 31, 2016, and December 31, 2015

(In thousands of reais)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

Consolidated

 

 

 

 

Company

 

Consolidated

ASSETS

Note

 

03/31/16

 

12/31/15

 

03/31/16

 

12/31/15

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Note

 

03/31/16

 

12/31/15

 

03/31/16

 

12/31/15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

15,685,936

 

15,185,519

 

17,991,990

 

17,909,303

 

Current liabilities

 

 

15,443,599

 

15,948,843

 

17,193,857

 

17,981,713

Cash and cash equivalents

4

 

3,316,988

 

4,206,595

 

4,068,214

 

5,336,845

 

Personnel, social charges and benefits

14

 

428,810

 

520,023

 

618,718

 

698,846

Trade accounts receivable, net

5

 

6,933,976

 

7,000,379

 

8,274,198

 

8,285,319

 

Trade accounts payable

15

 

7,056,268

 

7,496,947

 

7,707,777

 

8,373,235

Inventories, net

6

 

479,541

 

558,264

 

508,853

 

603,631

 

Taxes, charges and contributions

16

 

1,194,959

 

1,175,293

 

1,771,395

 

1,716,002

Taxes recoverable

7.1

 

2,066,115

 

2,164,544

 

2,356,971

 

2,521,292

 

Dividends and interest on equity

17

 

2,601,770

 

2,209,362

 

2,601,770

 

2,209,362

Judicial deposits and garnishments

8

 

242,870

 

235,343

 

242,930

 

235,343

 

Provisions and contingencies

18

 

939,789

 

894,069

 

963,523

 

914,377

Prepaid expenses

9

 

1,129,960

 

317,325

 

1,179,752

 

356,446

 

Deferred revenues

19

 

527,187

 

562,601

 

531,371

 

564,557

Dividends and interest on equity

17

 

18,645

 

18,645

 

489

 

489

 

Loans, financing, financial lease and contingent consideration

20

 

920,284

 

1,811,037

 

1,224,232

 

2,222,067

Derivative transactions

33

 

91,398

 

81,306

 

91,398

 

81,306

 

Debentures

20

 

95,258

 

120,924

 

95,258

 

120,924

Other assets

10

 

1,406,443

 

603,118

 

1,269,185

 

488,632

 

Derivative transactions

33

 

172,145

 

151,686

 

172,145

 

151,686

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

21

 

1,507,129

 

1,006,901

 

1,507,668

 

1,010,657

Non-current assets

 

 

81,730,637

 

82,387,176

 

83,253,312

 

83,775,761

 

 

 

 

 

 

 

 

 

 

 

Short-term investments pledged as collateral

 

 

90,598

 

90,863

 

109,464

 

109,864

 

Non-current liabilities

 

 

12,678,266

 

13,056,610

 

14,756,737

 

15,136,109

Trade accounts receivable, net

5

 

179,631

 

217,621

 

284,670

 

330,451

 

Personnel, social charges and benefits

14

 

24,724

 

19,808

 

24,724

 

19,808

Taxes recoverable

7.1

 

285,322

 

337,477

 

343,668

 

409,653

 

Trade accounts payable

15

 

-

 

-

 

67,742

 

67,742

Deferred taxes

7.2

 

-

 

-

 

792,271

 

711,590

 

Taxes, charges and contributions

16

 

57,402

 

57,416

 

85,882

 

87,018

Judicial deposits and garnishments

8

 

5,077,228

 

4,880,489

 

5,738,876

 

5,518,120

 

Deferred taxes

7.2

 

99,191

 

155,951

 

-

 

-

Prepaid expenses

9

 

26,467

 

28,632

 

28,266

 

30,609

 

Provisions and contingencies

18

 

5,326,734

 

5,077,839

 

6,123,109

 

5,890,319

Derivative transactions

33

 

250,487

 

417,558

 

250,487

 

417,558

 

Deferred revenues

19

 

466,253

 

358,963

 

466,408

 

359,237

Other assets

10

 

51,391

 

55,228

 

57,876

 

62,799

 

Loans, financing, financial lease and contingent consideration

20

 

2,923,214

 

3,141,987

 

4,174,007

 

4,454,509

Investments

11

 

24,204,859

 

24,342,692

 

96,960

 

101,161

 

Debentures

20

 

3,428,231

 

3,423,790

 

3,428,231

 

3,423,790

Property, plant and equipment, net

12

 

21,762,478

 

22,019,076

 

30,236,307

 

30,476,765

 

Derivative transactions

33

 

42,805

 

82,421

 

42,805

 

82,421

Intangible assets, net

13

 

29,802,176

 

29,997,540

 

45,314,467

 

45,607,191

 

Liabilities for post-retirement benefits plans

32

 

74,904

 

76,616

 

82,904

 

85,343

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

21

 

234,808

 

661,819

 

260,925

 

665,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

69,294,708

 

68,567,242

 

69,294,708

 

68,567,242

 

 

 

 

 

 

 

 

 

 

 

Capital

22

 

63,571,416

 

63,571,416

 

63,571,416

 

63,571,416

 

 

 

 

 

 

 

 

 

 

 

Capital reserves

22

 

1,347,952

 

1,347,952

 

1,347,952

 

1,347,952

 

 

 

 

 

 

 

 

 

 

 

Income Reserves

22

 

2,412,925

 

2,410,571

 

2,412,925

 

2,410,571

 

 

 

 

 

 

 

 

 

 

Premium on acquisition of equity interest

22

 

(75,388)

 

(75,388)

 

(75,388)

 

(75,388)

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

22

 

5,644

 

25,468

 

5,644

 

25,468

 

 

 

 

 

 

 

 

 

 

 

Additional dividend proposed

22

 

1,287,223

 

1,287,223

 

1,287,223

 

1,287,223

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

22

 

744,936

 

-

 

744,936

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

97,416,573

 

97,572,695

 

101,245,302

 

101,685,064

 

TOTAL LIABILITIES AND EQUITY

 

 

97,416,573

 

97,572,695

 

101,245,302

 

101,685,064

 

 

 

Page. 4


 
 
 

 

TELEFÔNICA BRASIL S.A.

Income Statements

Three-month periods ended March 31, 2016 and 2015

(In thousands of reais, except net earnings per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

Consolidated

 

Note

 

1st quarter of 2016

 

1st quarter of 2015

 

1st quarter of 2016

 

1st quarter of 2015

 

 

 

 

 

 

 

 

 

 

Net Operating Income

23

 

8,358,113

 

8,421,281

 

10,431,396

 

8,983,078

 

 

 

 

 

 

 

 

 

 

Cost of services provided and goods sold

24

 

(4,157,251)

 

(4,288,962)

 

(5,356,642)

 

(4,536,840)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

4,200,862

 

4,132,319

 

5,074,754

 

4,446,238

 

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

(2,724,707)

 

(3,248,384)

 

(3,199,521)

 

(3,282,604)

Selling expenses

24

 

(2,582,360)

 

(2,682,163)

 

(2,985,529)

 

(2,708,646)

General and administrative expenses

24

 

(538,651)

 

(421,041)

 

(615,087)

 

(429,820)

Other operating income

25

 

632,672

 

112,774

 

664,297

 

113,826

Other operating expenses

25

 

(236,368)

 

(257,954)

 

(263,202)

 

(257,964)

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

1,476,155

 

883,935

 

1,875,233

 

1,163,634

 

 

 

 

 

 

 

 

 

 

Financial income

26

 

747,601

 

591,901

 

798,200

 

619,158

Financial expenses

26

 

(1,044,048)

 

(839,857)

 

(1,114,993)

 

(837,010)

Equity pick-up

11

 

256,011

 

204,450

 

248

 

232

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

 

1,435,719

 

840,429

 

1,558,688

 

946,014

 

 

 

 

 

 

 

 

 

 

Income and social contribution taxes

27

 

(217,489)

 

(260,710)

 

(340,458)

 

(366,295)

 

 

 

 

 

 

 

 

 

 

Net income for the period

 

 

1,218,230

 

579,719

 

1,218,230

 

579,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per common share (in R$)

28

 

0.68

 

0.48

 

 

 

 

Basic and diluted earnings per preferred share (in R$)

28

 

0.74

 

0.53

 

 

 

 

 

 

 

 

 

 

 

Page. 5


 
 

 

 

TELEFÔNICA BRASIL S.A.

Statements of Changes in Shareholders’ Equity

Three-month periods ended March 31, 2016 and 2015

(In thousands of reais)

 

 

 

 

 

Capital reserves

 

Income Reserves

 

 

 

 

 

 

 

 

 

Capital

 

Premium on acquisition of interest

 

Other capital reserves

 

Treasury Shares

 

Legal reserve

 

Tax incentives

 

Reserve for expansion and modernization

 

Retained earnings

 

Additional dividend proposed

 

Other comprehensive income

 

Total Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2014

37,798,110

 

(70,448)

 

2,799,004

 

(112,107)

 

1,532,630

 

1,849

 

-

 

-

 

2,768,592

 

232,465

 

44,950,095

Additional dividends proposed for year 2014

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(2,750,000)

 

-

 

(2,750,000)

DIPJ (Corporate Income Tax Return) Adjustment - Tax incentives

-

 

-

 

-

 

-

 

-

 

426

 

-

 

(426)

 

-

 

-

 

-

Cancellation of treasury shares, according to EGM of March 12, 2015

-

 

-

 

(112,107)

 

112,107

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Other comprehensive income

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

403,786

 

403,786

Net income for the period

-

 

-

 

-

 

-

 

-

 

-

 

-

 

579,719

 

-

 

-

 

579,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2015

37,798,110

 

(70,448)

 

2,686,897

 

-

 

1,532,630

 

2,275

 

-

 

579,293

 

18,592

 

636,251

 

43,183,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional dividends proposed for year 2014

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(18,592)

 

-

 

(18,592)

Expired equity instruments

-

 

-

 

-

 

-

 

-

 

-

 

-

 

494,001

 

-

 

-

 

494,001

DIPJ (Corporate Income Tax Return) Adjustment - Tax incentives

-

 

-

 

-

 

-

 

-

 

4,653

 

-

 

(4,653)

 

-

 

-

 

-

Capital increase - EGM of April 28, 2015

15,812,000

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

15,812,000

Direct costs on capital increases (net of taxes), according to EGM of April 28, 2015

-

 

-

 

(58,657)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(58,657)

Capital increase - EGM of April 30, 2015

295,285

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

295,285

Direct costs on capital increases (net of taxes), according to EGM of April 30, 2015

-

 

-

 

(3,776)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(3,776)

Capital increase - merger of shares in GVTPart – EGM of May 28, 2015

9,666,021

 

-

 

(1,188,707)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

8,477,314

Dissenters' right - Acquisition of GVTPart.

-

 

-

 

-

 

(87,805)

 

-

 

-

 

-

 

-

 

-

 

-

 

(87,805)

Premium on acquisition of equity interest by TData

-

 

(4,940)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(4,940)

Other comprehensive income

-

 

-

 

-

 

-

 

-

 

-

 

-

 

264,990

 

-

 

(610,783)

 

(345,793)

Net income for the period

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,840,530

 

-

 

-

 

2,840,530

Income allocation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legal reserve

-

 

-

 

-

 

-

 

171,013

 

-

 

-

 

(171,013)

 

-

 

-

 

-

Interim interest on equity

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,745,925)

 

-

 

-

 

(1,745,925)

Interim dividends

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(270,000)

 

-

 

-

 

(270,000)

Expansion and modernization reserve

-

 

-

 

-

 

-

 

-

 

-

 

700,000

 

(700,000)

 

-

 

-

 

-

Additional dividend proposed

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,287,223)

 

1,287,223

 

-

 

-

Balances as of December 31, 2015

63,571,416

 

(75,388)

 

1,435,757

 

(87,805)

 

1,703,643

 

6,928

 

700,000

 

-

 

1,287,223

 

25,468

 

68,567,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired equity instruments

-

 

-

 

-

 

-

 

-

 

-

 

-

 

66,060

 

-

 

-

 

66,060

DIPJ (Corporate Income Tax Return) Adjustment - Tax incentives

-

 

-

 

-

 

-

 

-

 

2,354

 

-

 

(2,354)

 

-

 

-

 

-

Other comprehensive income

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(19,824)

 

(19,824)

Net income for the period

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,218,230

 

-

 

-

 

1,218,230

Interim interest on equity

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(537,000)

 

-

 

-

 

(537,000)

Balances as of March 31, 2016

63,571,416

 

(75,388)

 

1,435,757

 

(87,805)

 

1,703,643

 

9,282

 

700,000

 

744,936

 

1,287,223

 

5,644

 

69,294,708

 

 

Page. 6


 
 

 

 

TELEFÔNICA BRASIL S.A.

 

 

 

 

 

 

 

 

Statements of Comprehensive Income

 

 

 

 

 

 

 

 

Three-month periods ended March 31, 2016 and 2015

 

 

 

 

 

 

 

 

(In thousands of reais)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

Consolidated

 

 

1st quarter of 2016

 

1st quarter of 2015

 

1st quarter of 2016

 

1st quarter of 2015

Net income for the period

 

1,218,230

 

579,719

 

1,218,230

 

579,719

 

 

 

 

 

 

 

 

 

Unrealized losses on investments available for sale

 

(238)

 

(989)

 

(238)

 

(989)

Taxes on unrealized losses on investments available for sale

 

81

 

336

 

81

 

336

 

 

(157)

 

(653)

 

(157)

 

(653)

 

 

 

 

 

 

 

 

 

Gains (losses) on derivative transactions

 

(23,418)

 

605,533

 

(23,418)

 

605,533

Taxes on gains (losses) on derivative transactions

 

7,962

 

(205,881)

 

7,962

 

(205,881)

 

 

(15,456)

 

399,652

 

(15,456)

 

399,652

 

 

 

 

 

 

 

 

 

Cumulative translation adjustments (CTA) on foreign currency transactions

 

(4,211)

 

4,787

 

(4,211)

 

4,787

 

 

 

 

 

 

 

 

 

Other net comprehensive income to be reclassified to income in subsequent periods

 

(19,824)

 

403,786

 

(19,824)

 

403,786

 

 

 

 

 

 

 

 

 

Comprehensive income for the period, net of taxes

 

1,198,406

 

983,505

 

1,198,406

 

983,505

 

 

Page. 7


 
 

 

 

 

TELEFÔNICA BRASIL S.A.

Statements of Cash Flows

Three-month periods ended March 31, 2016 and 2015

(In thousands of Reais)

 

 

 

 

 

 

 

 

 

 

 

Company

 

Consolidated

 

 

1st quarter of 2016

 

1st quarter of 2015

 

1st quarter of 2016

 

1st quarter of 2015

 

 

 

 

 

 

 

 

 

Total cash generated from operating activities

 

1,312,364

 

772,856

 

2,055,866

 

1,002,944

 

 

 

 

 

 

 

 

 

Expenses (incomes) not representing changes in cash

 

3,037,654

 

3,084,462

 

3,994,398

 

3,445,754

Income before taxes

 

1,435,719

 

840,429

 

1,558,688

 

946,014

Depreciation and amortization

 

1,442,448

 

1,398,999

 

1,913,255

 

1,405,127

Foreign exchange gain (losses) on loans

 

(32,322)

 

14,683

 

(32,322)

 

14,683

Currency variations gain (losses)

 

84,736

 

89,437

 

73,853

 

89,346

Equity pick-up

 

(256,011)

 

(204,450)

 

(248)

 

(232)

Losses (gains) on write-off/disposal of property

 

(469,670)

 

14,640

 

(475,038)

 

14,767

Estimated impairment losses on accounts receivable

 

276,665

 

304,662

 

344,390

 

324,415

Provision for (reversal from) suppliers

 

63,441

 

209,403

 

59,263

 

236,073

Write-off and reversal of estimated losses from impairment and obsolescence of inventories

 

(10,413)

 

(4,617)

 

(10,210)

 

(5,710)

Pension plans and other post-retirement benefits

 

(2,031)

 

10,797

 

(2,772)

 

10,792

Provisions for tax, labor, civil and regulatory contingencies

 

247,439

 

181,929

 

279,076

 

181,929

Interest expenses

 

253,573

 

212,471

 

294,067

 

212,471

Other

 

4,080

 

16,079

 

(7,604)

 

16,079

 

 

 

 

 

 

 

 

 

Increase or decrease in operating assets and liabilities

 

(1,725,290)

 

(2,311,606)

 

(1,938,532)

 

(2,442,810)

Trade Accounts receivable

 

(172,272)

 

(238,810)

 

(287,488)

 

(262,545)

Inventories

 

89,136

 

(136,456)

 

104,988

 

(161,909)

Taxes recoverable

 

48,495

 

(39,817)

 

64,973

 

(40,699)

Prepaid expenses

 

(711,897)

 

(724,389)

 

(722,390)

 

(726,938)

Other current assets

 

(84,224)

 

42,196

 

(61,452)

 

(958)

Other non-current assets

 

4,156

 

2,322

 

5,256

 

2,345

Personnel, social charges and benefits

 

(86,297)

 

(146,810)

 

(75,212)

 

(146,708)

Trade accounts payable

 

(126,048)

 

(612,353)

 

(190,389)

 

(562,665)

Taxes, charges and contributions

 

(52,557)

 

(96,204)

 

14,775

 

(92,185)

Interest paid

 

(227,688)

 

(204,804)

 

(267,756)

 

(204,804)

Income and social contribution taxes paid

 

(86,344)

 

-

 

(195,286)

 

(70,148)

Other current liabilities

 

(113,722)

 

(71,186)

 

(120,268)

 

(88,130)

Other non-current liabilities

 

(206,028)

 

(85,295)

 

(208,283)

 

(87,466)

 

 

 

 

 

 

 

 

 

Total cash used in investment activities

 

(1,037,035)

 

(1,817,077)

 

(1,990,324)

 

(1,824,594)

Acquisition of property, plant and equipment, and intangible assets

 

(1,326,148)

 

(1,730,267)

 

(1,874,246)

 

(1,737,896)

Cash from disposal of property, plant and equipment

 

321

 

4,939

 

509

 

5,118

Redemption of (investment in) judicial deposits

 

(100,603)

 

(91,749)

 

(116,587)

 

(91,816)

Dividends and interest on equity received

 

389,395

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

Total cash generated by (used in) financing activities

 

(1,164,936)

 

(658,885)

 

(1,334,173)

 

(658,885)

Payment of loans, financing and debentures

 

(1,170,893)

 

(1,028,246)

 

(1,340,130)

 

(1,028,246)

Funding from loans and debentures

 

-

 

12,157

 

-

 

12,157

Net from derivative agreements

 

6,481

 

359,005

 

6,481

 

359,005

Payments regarding grouping of shares

 

(164)

 

(42)

 

(164)

 

(42)

Payment of dividends and interest on equity

 

(360)

 

(1,759)

 

(360)

 

(1,759)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(889,607)

 

(1,703,106)

 

(1,268,631)

 

(1,480,535)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

4,206,595

 

3,835,304

 

5,336,845

 

4,692,689

Cash and cash equivalents at the end of the period

 

3,316,988

 

2,132,198

 

4,068,214

 

3,212,154

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents in the period

 

(889,607)

 

(1,703,106)

 

(1,268,631)

 

(1,480,535)

 

 

 

 

Page. 8


 
 

 

 

TELEFÔNICA BRASIL S.A.

Statements of Value Added

Three-month periods ended March 31, 2016 and 2015

(In thousands of Reais)

 

 

 

 

 

 

 

 

 

 

 

Company

 

Consolidated

 

 

1st quarter of 2016

 

1st quarter of 2015

 

1st quarter of 2016

 

1st quarter of 2015

 

 

 

 

 

 

 

 

 

Revenues

 

11,582,606

 

11,396,406

 

14,241,888

 

12,047,189

Sales of goods and services

 

11,621,783

 

11,549,180

 

14,268,463

 

12,218,664

Other incomes

 

237,488

 

151,888

 

317,815

 

152,940

Estimated impairment losses from trade accounts receivable

 

(276,665)

 

(304,662)

 

(344,390)

 

(324,415)

 

 

 

 

 

 

 

 

 

Inputs purchased from third parties

 

(4,689,725)

 

(4,425,973)

 

(5,669,267)

 

(4,721,753)

Cost of goods and products sold and services rendered

 

(3,155,415)

 

(2,395,515)

 

(3,919,365)

 

(2,678,893)

Materials, electric energy, third-party services and other expenses

 

(2,019,405)

 

(2,011,111)

 

(2,239,976)

 

(2,024,480)

Asset Loss/Recovery

 

485,095

 

(19,347)

 

490,074

 

(18,380)

 

 

 

 

 

 

 

 

 

Gross value added

 

6,892,881

 

6,970,433

 

8,572,621

 

7,325,436

 

 

 

 

 

 

 

 

 

Withholdings

 

(1,442,448)

 

(1,398,999)

 

(1,913,255)

 

(1,405,127)

Depreciation and amortization

 

(1,442,448)

 

(1,398,999)

 

(1,913,255)

 

(1,405,127)

 

 

 

 

 

 

 

 

 

Net value added produced

 

5,450,433

 

5,571,434

 

6,659,366

 

5,920,309

 

 

 

 

 

 

 

 

 

Value added received in transfer

 

1,003,612

 

796,351

 

798,448

 

619,390

Equity pick-up

 

256,011

 

204,450

 

248

 

232

Financial income

 

747,601

 

591,901

 

798,200

 

619,158

 

 

 

 

 

 

 

 

 

Total value added for distribution

 

6,454,045

 

6,367,785

 

7,457,814

 

6,539,699

 

 

 

 

 

 

 

 

 

Value Added Distribution

 

(6,454,045)

 

(6,367,785)

 

(7,457,814)

 

(6,539,699)

 

 

 

 

 

 

 

 

 

Personnel, social charges and benefits

 

(736,892)

 

(697,711)

 

(960,554)

 

(703,299)

Direct compensation

 

(492,171)

 

(498,370)

 

(633,994)

 

(502,100)

Benefits

 

(205,603)

 

(168,600)

 

(274,499)

 

(170,172)

FGTS (unemployment compensation fund)

 

(39,118)

 

(30,741)

 

(52,061)

 

(31,027)

Taxes, charges and contributions

 

(2,935,395)

 

(3,756,434)

 

(3,540,942)

 

(3,924,247)

Federal

 

(1,154,897)

 

(1,286,428)

 

(1,493,839)

 

(1,421,776)

State

 

(1,769,142)

 

(2,458,725)

 

(2,000,260)

 

(2,461,404)

Municipal

 

(11,356)

 

(11,281)

 

(46,843)

 

(41,067)

Return on third-party capital

 

(1,563,528)

 

(1,333,921)

 

(1,738,088)

 

(1,332,434)

Interest

 

(1,032,085)

 

(838,045)

 

(1,101,368)

 

(835,157)

Rental

 

(531,443)

 

(495,876)

 

(636,720)

 

(497,277)

Return on equity

 

(1,218,230)

 

(579,719)

 

(1,218,230)

 

(579,719)

Retained earnings

 

(1,218,230)

 

(579,719)

 

(1,218,230)

 

(579,719)

 

 

Page. 9


 
 

 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

 

 

1)   THE COMPANY AND ITS 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 the Telefónica Group ( “Group”), the telecommunications industry leader in Spain, also present in several  Europe and Latin America countries.

 

At March 31, 2016 and December 31, 2015, Telefónica S.A. (“Telefónica”), the Group holding company based in Spain, held a total direct and indirect interest in the Company of 73.58%, including treasury shares (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 US Securities and Exchange Commission (“SEC”), of the United States of America, and its American Depositary Shares (“ADSs”) are classified in 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 (“STFC”) concession agreement, and Multimedia Communication Service (“SCM”) authorization, respectively.

 

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) and has authorization for land-line calls originated in Regions I and II, as established in the General Concession Plan (“PGO”).

 

The Company is also authorized to render 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.

 

In accordance with the service concession agreement, every two years, during the agreement’s 20-year term, the Company shall pay a fee equivalent to 2% of its prior-year STFC revenues, net of applicable taxes and social contribution taxes (Note 21). The Company’s current STFC concession agreement is valid until December 31, 2025.

 

In accordance with the SMP authorization agreements, every two years, after the first renewal of these agreements, the Company shall pay a fee equivalent to 2% of its prior-year revenues, net of applicable taxes and social contribution taxes, related to the application of Basic and Alternative Services Plans (Note 21). These agreements can be extended only once for a term of 15 years.

In the auction for sale of the remaining radiofrequency bands of 1,800 MHz, 1,900 MHz and 2,500 MHz, held by the National Telecommunications Agency (ANATEL) on December 17, 2015, the Company was the out bidder of seven 2,500MHz frequency lots, having offered the amount of R$185,450, as follows: lot E2 DDD11 Greater São Paulo - R$110,250; lot E18 DDD21 Greater Rio - R$55,000; lot E39 DDD48 Florianópolis and region - R$500; lot E43 DDD51 Greater Porto Alegre - R$16,690; lot E46 DDD54 Caxias do Sul and region - R$2,085; lot E51 DDD63 Palmas and region - R$400; and lot E58 DDD67 Dourados and region - R$525.

As such, the Company will increase its service rendering capacity using 4G technology in important regions of Brazilian territory, with additional 10+10 MHz band, supplementing the 20+20Mhz band acquired in the 2012 bidding. The amount payable and the use terms shall observe the rules provided in the bidding notice and as defined by ANATEL.

 

 

Page. 10


 
 

 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

 

 

Service concessions and authorizations are granted by ANATEL, under the terms of Law No. 9472 of July 16, 1997 - General Telecomunication 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.

 

The information on the operation areas (regions) and due dates of the radiofrequency authorizations for SMP services  is the same of Note 1b) Operations as disclosed in the financial statements for the year ended December 31, 2015.

 

GVT Participações S.A. (“GVTPart.”) is the controlling company of Global Village Telecom S.A. (“GVT”), companies that have been controlled by the Company since May 28, 2015 (Note 3). GVT is the direct controlling company of POP Internet Ltda. (“POP”), and indirect controlling company of Innoweb Ltda. (“Innoweb”), Brazil-based entities operating in the telecommunications industry.

 

GVT is engaged in the provision of STFC, SCM and pay-TV (SEAC) services throughout Brazil. POP is a provider of free Internet access. Innoweb provides telephone services using VoIP technology, which allows calls using the Internet at lower costs than those using conventional telephone technology, using dedicated circuits.

 

c) Corporate Restructuring

 

In the meeting held on March 14, 2016, the Company's Board of Directors approved, subject to approval of the Special Shareholders’ Meeting (“AGE”) to be held on April 1, 2016, the terms and conditions of the Corporate Restructuring, as described below:

 

The Corporate Restructuring involves the Company and its wholly-owned subsidiary, GVTPart. (holding company whose business purpose is to hold interest in other national or foreign companies, as shareholder), preceded by restructuring involving its subsidiaries; namely GVT (whose business purpose is to render land-line telecommunication services, including pay-TV services in all regions of Brazil) and POP (whose business purpose is to develop IT and Internet activities).

 

The corporate structure, considering only the companies involved in the Corporate Restructuring March 31, 2016 was as follows:

 
 


The Corporate Restructuring aims at standardizing the services provided by the companies involved in this process by (i) concentrating the rendering of telecommunication services on one single company, that is, the Company; and (ii) migrating to POP all services provided by GVT not related to telecommunication services.

As such, the simplification of the corporate structure and the concentration of telecommunication services on the Company will lead to a converging environment, facilitating consolidation and confluence of the offering of telecommunication services and service packages; optimizing administrative and operating costs; and standardizing the operations of the companies involved in the Corporate Restructuring.

The Corporate Restructuring was approved by ANATEL through Ruling No. 50169, of January 22, 2016, which was published in the Federal Official Gazette (“DOU”) on January 28, 2016 with the conditions provided therein.

 

Page. 11


 
 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

                                           

The Corporate Restructuring to be submitted to the Special Shareholders’ Meeting (AGE) is the merger of GVTPart. into the Company (note 36).

The Corporate Restructuring should take place on the same date and as follows: (i) GVT will be spun off and involving assets, rights and obligations related to the telecommunications activities, its net assets relating to property, rights and obligations connected to telecommunications activities will be absorbed by GVTPart., while other net assets relating to property, rights and obligations connected to activities other than telecommunications will be absorbed by POP; and (iii) the net assets of GVTPart. (after the merger of GVT’s net assets, item (i)) will be merged into the Company.

After the intended Corporate Restructuring, the corporate structure considering only the companies involved in the Corporate Restructuring will be as follows:

 

 

Given that the merger of GVTPart. into the Company will not generate capital increase or change in shareholders’ interest in the Company, since GVTPart. is a wholly-owned subsidiary of the Company, the replacement of shares held by the shareholders in GVTPart. with shares in the Company is not applicable. Consequently, there are no minority interests to be considered and, therefore, according to the CVM’s position in similar prior cases, and on the terms of CVM Resolution No. 559/08, the provisions of article 264 of Law No. 6404/76 and its further amendments do not apply either.

In addition, in relation to the transaction that precedes the merger of GVTPart into the Company, the replacement of shares is not applicable, since GVT is a subsidiary of GVTPart. and of the Company itself, thus there are no minority shareholders.

On the terms of article 137 of Law No. 6404/76 and its further amendments, the Corporate Restructuring does not entitle Company’s shareholders the right of withdrawal. Furthermore, considering that there are no minority shareholders of GVTPart., since it is a wholly-owned subsidiary of the Company, there is no question of right to withdrawal  and exercise of the right to withdraw of non-controlling shareholders of GVTPart., as provided for in article 136, item iv, and article 137 of Law No. 6404/76 and its further amendments.

2)    BASIS OF PREPARATION AND PRESENTATION OF THE QUARTERLY FINANCIAL STATEMENTS

 

2.1) Statement of Compliance

 

The individual (Company) and consolidated quarterly financial statements (ITRs) were prepared and are presented in accordance with the accounting practices adopted in Brazil, which comprise CVM standards and CPC (Accounting Pronouncements Committee) pronouncements, in compliance with the International Financial Accounting Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). All significant information in the financial statements, and solely such information, are disclosed and correspond to that used by management in its administration.

 

The Board of Directors authorized the issuance of these ITRs at the meeting held on April 25, 2016.

 

 

 

 

2.2) Bases of Preparation and Presentation

 

 

Page. 12


 
 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

                                           

The Company’s quarterly financial statements for the three-month period ended March 31, 2016 are presented in thousands of Reais (unless otherwise stated), which is the functional currency of the Company, and were prepared under a going concern assumption.

 

These quarterly financial statements compares the quarters ended March 31, 2016 and 2015, except for the balance sheets, that compare the positions as of March 31, 2016 and December 31, 2015.

 

The quarterly financial statements were prepared pursuant to the accounting principles, practices and criteria consistent with those adopted in preparing the financial statements for the year ended December 31, 2015 (Note 3 – “Summary of Significant Accounting Practices”), and must be analyzed jointly with the referred financial statements.

 

As a result of the consolidation of GVTPart. (Note 3) as from May 1, 2015, the consolidated quarterly financial statements for the three-month period ended June 31, 2016 and 2015 are not comparable.

 

In compliance with CVM Instruction No. 565, of June 15, 2015, the Company reports, in Note 35, a pro-forma consolidated income statements (not audited or reviewed) for the three-month period ended March 31, 2015, and for the year ended December 31, 2015.

 

Some figures on the notes to the quarterly financial statements were reclassified to allow comparability between the information for the three-month periods ended March 31, 2016 and 2015, where applicable.

 

The quarterly financial statements were prepared pursuant to the accounting principles, practices and criteria consistent with those adopted in preparing the financial statements for the year ended December 31, 2015, as well as the new pronouncements, interpretations and amendments that had been published, as described below:

 

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, revision: The amendments to this standard provide a guidance regarding the accounting treatment to be adopted upon the reclassification of an asset (or group of assets) from the “held for sale” category to the “distribution to shareholders” category (or conversely). This standard is applicable as from the year beginning on January 1, 2016. The Company does not have plans for asset sales or distribution to shareholders and, does not expect any significant impacts on its financial position.

 

IFRS 7 Financial Instruments: Disclosures, revision: The amendments to this standard provide a guidance regarding the disclosure of the accounting policies that form the measurement base (or bases) used in the preparation of the financial statements, and other accounting policies used that are relevant to allow understanding the financial statements. This standard is applicable as from the year beginning on January 1, 2016. The Company already discloses significant accounting practices in its financial statements.

 

IFRS 11 Accounting for Acquisitions of Interests in Joint Operations, revision: The amendments to this standard require that joint investors, which record the acquisition of equity interest in joint operations that is a business apply the relevant IFRS 3 principles applicable to business combination. The amendments further clarify that the interest previously held in joint operations is not remeasured upon acquisition of additional interest in the same joint operation, while the joint control is held. Additionally, 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 are applicable to both, 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 did not acquire interest in joint operations fitting into this standard.

 

 

 

 

IFRS 14 Regulatory Deferral Accounts, issue: This standard is optional and allows companies whose activities are subject to regulated fees to continue applying most part of its accounting policies on regulatory deferral accounts balances upon the first-time adoption of IFRS. The companies that adopt IFRS 14 must present regulatory deferral accounts separately in the balance sheet and in the other comprehensive income. This standard requires disclosures on the nature and risks associated with company’s regulated fees, 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 impact on its financial position, since it has already been preparing its financial statements based on the effective IFRS.

 

Page. 13


 
 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

                                           

 

IAS 1 Disclosure Initiative, revision: This standard addresses changes in the overall financial statements of a company. This standard is applicable as from year beginning on  or after January 1, 2016. The model for disclosure of the Company’s financial information is compliant with this standard, and the Company does not expect impacts on its financial disclosures.

 

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 as from the year beginning on January 1, 2016. The Company does not expect any significant impact on its financial position.

 

IAS 19 Employee Benefits, revision: The amendments to this standard require that the Company disclosure information about the rates used to discount obligations with post-employment benefits, determining by reference market earnings at the end of the reference period of the obligations of high-quality institutions. For currencies for which there is no active market in such obligations of high-quality institutions, there shall be use of market earnings (at the end of the period of disclosure) of government securities denominated in that currency. The currency and term of the obligations of the companies or of government obligations must be consistent with the currency and term expected of obligations with post-employment benefits. In Brazil, there is no confirmed high-quality securities market, and that is the reason why the Company and its actuaries have been using Brazilian Government securities for many years, mainly NTN-Bs (National Treasury Notes – B series), with terms equivalent to the average duration of each plan for purposes of present value discount of the actuarial liabilities. The currency used for the payment of the benefits and for NTN-Bs valuation is the Real.

 

Amendments to IAS 27 Equity Method in Separate Financial Statements, revision: The amendments to this standard allow the Company to use the equity pick-up method for investments in subsidiaries, joint ventures and affiliates in its individual financial statements. This standard is applicable as from the year beginning on January 1, 2016. This amendment did not generate any impact on the individual financial statements of the Company, since the equivalent Brazillian accounting standards (CPC-35-R2) already provided the use of this method.

 

IAS 34 Interim Financial Reporting, revision: The amendments to this standard require that the Company disclose in its interim financial statements must include the following information: (i) declaration of policies and calculation methods compared to the most recent annual financial statements; (ii) comments about seasonality; (iii) nature and quantity of unusual items that affect assets, liabilities, equity, revenues or cash flows due to their nature, dimension or occurrence; (iv) nature and number of changes in estimates of amounts disclosed in the comparative periods; (v) issues, repurchases and refunds of securities; (vi) dividends paid (aggregated or per share), separated by common and other shares; (vii) complete information by segment; (viii) events subsequent to the current period, which have not been reflected in the interim reports; and (ix) effects from changes in the Company’s corporate structure during the interim financial statements reporting period, among others. This standard is applicable as from the year beginning on January 1, 2016. The Company does not expect impact on its interim financial statements, since it already includes this information in the preparation of its quarterly financial statements.

 

On the date of preparation of these quarterly financial statements, the following IFRS amendments had been published, however, their application was not compulsory:

 

 

Page. 14


 
 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

                                           

 

Standards and Amendments to the Standards

 

Effective as of:

 

 

 

IFRS 9 Financial Instruments, issue of final version.

 

January 1, 2018

 

IFRS 10, 12 and IAS 28 Investment Entities: Applying the Consolidation Exception, review.

 

TBD

 

IFRS 15 Revenue from Contracts with Customers, issue.

 

January 1, 2018

 

IFRS 16 Leases, issue.

 

January 1, 2019

 

 

 

The Company does not early adopt any pronouncement, interpretation or amendment that has been issued, whose application is not compulsory. Based on the analyses performed by the Company, the adoption of most of these standards, amendments and improvements will not significantly impact the consolidated financial statements in the period of its first-time adoption. However, IFRS 15 may impact the period and amount of revenue recognition in relation to certain revenue transactions. The Telefónica Group is currently evaluating the impact of the application of this standard. In addition, the amendments introduced by IFRS 9 will affect financial instruments and operations with financial instruments performed on or after January 1, 2018. Additionally, IFRS 16 requires that the Company inform all assets and liabilities subject to leases (except short-term leases and leases of nominal amount). Therefore, the amendments introduced by IFRS 16 may have a significant impact on the Company’s financial statements.

 

2.3) Bases for consolidation

 

As of March 31, 2016 and December 31, 2015, the Company held interest in the following companies:

 

 

 

 

 

% interest

 

 

 

 

Investees

 

Type of investment

 

At 03.31.16

 

At 12.31.15

 

Country (Headquarters)

 

Core 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%

 

100.00%

 

Brazil

 

Telecommunications

 

 

 

 

 

 

 

 

 

 

 

Aliança Atlântica Holging B.V. ("Aliança")

 

Jointly-controlled subsidiary

 

50.00%

 

50.00%

 

Holland

 

Holding of the telecommunications sector

 

 

 

 

 

 

 

 

 

 

 

Companhia AIX de Participações ("AIX")

 

Jointly-controlled subsidiary

 

50.00%

 

50.00%

 

Brazil

 

Operation of underground telecommunications networks

 

 

 

 

 

 

 

 

 

 

 

Companhia ACT de Participações ("ACT")

 

Jointly-controlled subsidiary

 

50.00%

 

50.00%

 

Brazil

 

Technical assistance in telecommunication networks

 

Interests held in subsidiaries or jointly-controlled entities are measured under the equity method in the individual quarterly financial statements. In the consolidated quarterly financial statements, investments and all assets and liabilities 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 financial statements.

 

3)  ACQUISITION OF GVT PARTICIPAÇÕES S.A. (“GVTPart.”)

 

As disclosed in the financial statements for the year ended December 31, 2015 (Note 4 – “Acquisition of GVT Participações S.A.”), the Special Shareholders’ Meeting held on May 28, 2015 approved the acquisition of the total shares issued by GVTPart. and of 675,571 shares of GVT, as well as the merger of GVTPart. shares into the Company. As a result of these acts, the Company became the sole shareholder of GVTPart. and an indirect controlling shareholder of GVT, POP and Innoweb.

 

On May 28, 2015, the AGE approved the ratification of the Stock Purchase Agreement and Other Covenants executed by the Company and Vivendi and its subsidiaries (Société d’Investissements et de Gestion 108 SAS - “FrHolding108” and Société d’Investissements et de Gestion 72 S.A.), whereby all the shares issued by GVTPart. were acquired by the Company.

 

This transaction was subject to obtaining the applicable corporate and regulatory approvals, including from the Administrative Council for Economic Defense (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 Official Federal Gazette (“DOU”) on January 26, 2015, and by CADE at the 61st ordinary session of its Trial Court, held on March 25, 2015, published in the Official Federal Gazette (“DOU”) on March 31, 2015.

 

 

Page. 15


 
 

Telefônica Brasil S. A.

NOTES TO THE QUARTERLY FINANCIAL STATEMENTS

Three-month period ended March 31, 2016

(In thousands of Reais, unless otherwise stated)

                                           

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, of liabilities assumed at the acquisition date from the acquiree’s shareholders and equity interests issued in exchange for control over the acquiree.

 

The acquisition price was as follows:

 

 

 

 

Gross consideration in cash (4.663 billion euros)

 

15,964,853

(-) Contractual Adjustments (Net Debt)

 

(7,060,899)

Total consideration in cash, net

 

8,903,954

(+) Contingent Consideration

 

344,217

(+) Consideration in Shares at Fair Value

 

8,477,314

(-) Cash Flow Hedge Gain on Transaction, net of taxes (1)

(377,373)

(-) Refund according to sections 2.2.4 and 2.2.5 of SPA

(84,598)

Total consideration, net of Cash Flow Hedge

 

17,263,514


(1)
  Derivative transactions refer to cash flow hedges to protect the amount due in Euro to Vivendi, for the acquisition of GVTPart, against exchange rate variation of the amount.

Below is a breakdown of the fair value of identifiable net assets acquired for R$4,426,373, as well as goodwill recorded on the acquisition date.

 

 

Current assets

1,557,651

 

Current liabilities

5,299,662

Cash and cash equivalents

390,255

 

Personnel, social charges and benefits

170,989

Accounts receivable, net

947,378

 

Trade accounts payable

611,425

Inventories

4,641

 

Taxes, charges and contributions

346,569

Taxes recoverable

147,057

 

Loans and financing

3,968,615

Other assets

68,320

 

Provisions

17,866

 

 

 

Other liabilities

184,198

Non-current assets

12,026,239

 

 

 

Short-term investment pledged as collateral

17,871

 

Non-current liabilities

3,857,855

Taxes recoverable

65,798

 

Trade accounts payable

67,742

Deferred taxes (4)

610,873

 

Taxes, charges and contributions

1,342

Judicial deposits and garnishments

551,275

 

Loans and financing

3,088,414

Other assets

7,052

 

General Provisions (3)

679,294

Property and equipment, net (1)

7,970,117

 

Other liabilities