Numericable-SFR. Interim condensed consolidated financial statements for the nine-month period ended. September 30, 2015

Transcription

1 Interim condensed consolidated financial statements for the nine-month period ended September 30, Numericable-SFR, Square Béla Bartók 7505 Paris

2 CONSOLIDATED STATEMENT OF INCOME (in millions of euros) See Note 7 - Restated information Nine months ended September 30 September restated Revenues 8, Purchasing and subcontracting (2,890) (236) Other operating expenses (,889) (220) Staff costs and employee benefit expenses (60) (86) Depreciation, amortization and impairment (,73) (230) Other non-recurring income and expenses (6) (0) Operating income, Financial income Cost of gross financial debt (570) (335) Other financial expenses (28) (98) Net financial income (expense) 58 (427) Share in net income (loss) of associates 4 - Income before taxes,39 (24) Income tax income (expense) (40) 36 Net income (loss) from continuing operations 998 (78) Net income (loss) from discontinued operations - - Net income 998 (78) - Attributable to owners of the company 99 (78) - Attributable to non-controlling interests 7 (0) Earnings per share - basic 2.5 (.43) - diluted 2.4 (.43)

3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME September 30 September 30 (in millions of euros) 204 restated Net income 998 (78) Items that may be subsequently reclassified to profit or loss: Foreign currency translation adjustments () - Cash flow hedges 99 (207) Related taxes (37) 79 Other items related to associates 2 - Items that will not be subsequently reclassified to profit or loss: Actuarial gain (loss) - - Related taxes - - Items of other comprehensive income,060 (306) Of which: Comprehensive income attributable to owners of the company,053 (306) Comprehensive income attributable to non-controlling interests 7-2

4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION September 30 December 3 (in millions of euros) 204 restated ASSETS Goodwill 2,580 2,580 Intangible assets 4,232 4,558 Property, plant and equipment 5,645 5,897 Investments in associates Financial assets,767,003 Deferred tax assets Other non-current assets Non-current assets 24,68 24,73 Inventories Trade and other receivables 2,560 2,730 Current income tax receivable Other current financial assets 6 33 Cash and cash equivalents Current assets 3,267 3,99 Total Assets 27,948 28,704 September 30 December 3 (in millions of euros) 204 restated LIABILITIES Share capital Additional paid in capital 7,845 9,748 Reserves (,83) (2,270) Equity attributable to owners of the company 7,00 7,965 Non-controlling interests 0 Total invested equity 7, 7,975 Long term borrowings and financial liabilities 4,052 2,539 Other non-current financial liabilities Non-current provisions Deferred tax liabilities 2 43 Other non-current liabilities Non-current liabilities 5,4 4,302 Short-term borrowings and financial liabilities 4 79 Other financial liabilities Trade payables and other liabilities 4,570 5,04 Current income tax liabilities 0 27 Current provisions Other current liabilities Current liabilities 5,723 6,428 Total liabilities 27,948 28,704 See Note 7 - Restated information 3

5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to owners of the company (in millions of euros) Capital Aditional paid in capital Reserves other comprehensive income Total Noncontrolling interests Consolidated equity Position at December 3, ,08 (,977) (2) Dividends paid Comprehensive income - - (78) (29) (306) (0) (306) Share-based compensation Share repurchases - - (2) - (2) - (2) Other movements - - (0) - (0) (0) (0) Position at September 30, ,08 (2,53) (3) (52) 0 (5) Dividends paid Comprehensive income Issuance of new shares 266 4, ,720-4,720 Contributions of SFR shares 97 3, ,282-3,282 Share-based compensation Share repurchases Other movements - - (2) - (2) 9 (3) Position at December 3, ,748 (2,6) (09) 7, ,975 Dividends paid (7) (7) Comprehensive income ,053 7,060 Share-based compensation Capital reduction by cancellation of treasury shares (49) (,899), Share repurchases - - (,949) - (,949) - (,949) Other movements - (4) Position at September 30, 438 7,845 (,35) (48) 7,00 7, See Note.3 for a breakdown of reserves linked to items of other comprehensive income. 4

6 CONSOLIDATED STATEMENT OF CASH FLOWS September 30 September 30 (in millions of euros) 204 restated Net income attributable to owners of the company 99 (78) Adjustments: Non-controlling interests 7 - Depreciation, amortization and provisions, Share in net income (loss) of associates (4) (0) Net income from sale of property, plant and equipment and intangible assets Nine months ended 59 (4) Net financial income (expense) (58) 427 Income tax expense (income) 40 (36) Other non-cash items 0 3 Income tax paid (23) () Change in working capital (95) (47) Net cash flow provided by operating activities 2, Acquisitions of property, plant and equipment and intangible assets (,238) (275) Acquisition of consolidated entities, net of cash acquired (2) - Price adjustment of SFR and Virgin securities 2 - Acquisitions of other financial assets (2) (2) Disposals of property, plant and equipment and intangible assets 5 4 Disposal of consolidated entities, net of cash disposals - - Disposal of other financial assets - Change in working capital related to property, plant and equipment and intangible assets (23) () Change in restricted cash - (8,894) Net cash flow used by investing activities (,39) (9,68) Share repurchases (,948) - Dividends paid (7) - Issuance of debt 2,587,65 Repayment of debt 3 (828) (2,638) Interest paid (549) (26) Other flows from financing activities 4 5 (06) Net cash flow from (used by) financing activities (,632) 8,69 Net increase (decrease) in cash and cash equivalents (332) (87) Exchange rate impact on cash in foreign currencies 0 - Net cash and cash equivalents at begining of period Net cash and cash equivalents at end of period 25 4 of which cash and cash equivalents of which bank overdrafts (33) 0 5

7 See Note 7 Restated information As at September 30,, mainly corresponds to the drawdown of the RCF performed during the first half of and to the new Term Loans raised in July. As at September 30, 204, mainly corresponds to the debt raised as part of the acquisition of SFR for 653 million, net of 77 million of related fees. As at September 30,, mainly corresponds to the repayment in July of the 800 million drawdown of the RCF performed during the first half of. As at September 30, 204, mainly corresponds to the debt extinguished as part of the May 204 refinancing in the amount of 2,638 million. As at September 30,, mainly corresponds to the cash received under the receivable securitization contract ( 59 million) and the reverse factoring contract ( 4 million) and to customer deposits received ( 35 million). As at September 30, 204, mainly corresponds to the cost of extinguishing the debt repaid in May 204 in the amount of 89 million. This amount was restated upwards by 37 million on January, to take into account (i) a change in the presentation of cash which now includes bank overdrafts so that the cash position reflected in the cash flow statement above is net of bank overdrafts and (ii) a reclassification to cash of commercial bill receivables. 6

8 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of preparation of the Consolidated Financial Statements 8 2 Consolidation scope 0 3 Significant events in the nine-month period ended September 30, 0 4 Reconciliation of operating income to adjusted EBITDA 2 5 Segment information 2 6 Net Financial income (expense) 3 7 Income tax expense 3 8 Earnings per share 3 9 Goodwill 4 0 Cash and cash equivalents 5 Equity 6 2 Financial liabilities 7 3 Litigation 8 4 Commitments and contractual obligations 20 5 Related party transactions 20 6 Consolidating entity 20 7 Restated information 20 8 Events after the end of the reporting period 24 9 Condensed consolidated pro forma financial information 25 7

9 Basis of preparation of the Consolidated Financial Statements Numericable-SFR (hereafter the Company or the Group ) is a limited liability corporation (société anonyme) incorporated under French law in August 203 with headquarters in France. Created as a result of the merger of Numericable and SFR, Numericable-SFR Group aims to become, on the back of the largest fiber optic network and a leading mobile network, the national leader in France in the convergence of very-high-speed fixed-line/mobile. A global player, Numericable-SFR has major positions in all segments of the French telecommunications B2C, B2B, local authorities and wholesale market. This Note describes the changes in the accounting principles adopted by Numericable-SFR for the interim financial statements for the nine-month period ended September 30, since the annual consolidated financial statements for Basis of preparation of financial information The interim condensed consolidated financial statements for the nine-month period ended September 30, were approved by the Company s Board of Directors on November 9,. The interim condensed consolidated financial statements for the nine-month period ended September 30, were prepared in accordance with IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU). They should be read in conjunction with the Group s 204 annual consolidated financial statements. The interim condensed consolidated financial statements were prepared in accordance with the same principles as for December 3, 204, subject to the specifics of IAS 34, a change in accounting method and harmonization of management rules presented below, and the adoption of the new standards mentioned in Note.3. - Change in accounting method To improve its financial reporting and to ensure uniformity of treatment among Altice Group companies, the Group has opted to capitalize, in accordance with IAS 38 and in coherence with future standards, its customer acquisition costs for packages with commitments beginning on or after January,. This change of method has no material impact on the comparative financial information presented for the nine-month period ended September 30, 204. However, the interim condensed pro forma financial information presented in Note 9 has been restated for the impact of that change. Furthermore, intangible assets with a net carrying amount of 9 million were recognized provisionally at December 3, 204 under capitalized acquisition costs, as part of the allocation of goodwill related to the acquisition of SFR and Virgin Mobile. These impacts are disclosed in Note 7 - Financial Information. - Harmonization of management rules As part of the acquisition of SFR and to remain consistent with the principles adopted by Numericable-SFR Group, the Group has also harmonized its rules for estimating and capitalizing internal costs related to network and information systems development, costs for introducing Service Access Fees, and costs for the refurbishment of set-top boxes returned by customers. Accordingly, intangible assets with a net carrying amount of 27 million were recognized provisionally at December 3, 204, as part of the allocation of goodwill related to the acquisition of SFR. These impacts are disclosed in Note 7 - Financial Information. 8

10 - Changes in the presentation of the consolidated financial statements To improve its financial reporting and ensure uniformity of presentation of financial statements among Altice Group companies, Numericable-SFR Group has changed the presentation of its financial statements. The transition from the old to the new format for comparative financial statements as of September 30, 204 and December 3, 204 is described in detail in Note 7..2 Use of estimates and judgments In preparing the Group s financial statements, Management makes estimates insofar as many factors included in the financial statements cannot be measured accurately. The assumptions on which key estimates are based are the same as those described in Note 3 of the consolidated financial statements as of December 3, 204. Management reviews such estimates as the circumstances on which they are based change or as a result of new information or additional experience. Consequently, the estimates made at September 30, may be significantly modified in subsequent periods, and actual amounts may differ from estimates..3 New standards and interpretations Standards and interpretations applied from January, IFRIC Interpretation 2 Levies Charged by Public Authorities is applicable retrospectively from January,. This interpretation clarifies IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and addresses specifically the recognition of duties and tax liabilities imposed on companies by public authorities in accordance with applicable laws and regulations, with the exception of income tax and VAT, among other things. Applying this interpretation may therefore lead to modifying the analysis of the obligating event as the activity that triggers the recognition of a liability. This interpretation had no material impact on the Group s interim condensed consolidated financial statements for the nine-month period ended September 30, and on the comparative financial information. The application from January, of the other mandatory standards and amendments (listed below) had no material impact on the Group s interim condensed consolidated financial statements: - Amendments to IAS 9: Employee contributions to defined benefit plans - Annual improvements to IFRSs published in December 203 ( and Cycles). Standards and interpretations mandatory after September 30, and not adopted early The standards and interpretations likely to affect the Group are: - IFRS 5 Revenue from Contracts with Customers on the recognition of such revenue applicable from January, IFRS 9 Financial instruments, applicable to annual periods beginning on or after January, 208. Management is currently assessing the potential impact of the application of these standards, interpretations and amendments on the statement of income, the statement of financial position, the statement of cash flows and the Notes to the Financial Statements. 9

11 .4 Seasonality of business For B2C mobile activities, the year-end is an extremely sensitive sales period. For B2C fixed-line activities, revenues are mainly based on a fixed monthly fee and are thus not subject to seasonal fluctuations. The number of customers generally increases from September to January as households tend to make more purchases during back-to-school and end-of-year periods. The number of B2B customers usually increases in September and December when private and public companies establish their budget, whereas revenues arising from B2B telephony services tend to follow the cycle of school holidays, with especially low activity during summer and winter holidays as well as in May due to the many bank holidays, but this reduction is not material. 2 Consolidation scope In the nine-month period ended September 30,, there was no significant change in the consolidation scope as described in Note 35 to the Group s 204 consolidated financial statements. 3 Significant events in the nine-month period ended September 30, 3. Memorandum of Understanding signed with Vivendi on February 28, On February 8,, Numericable-SFR and its majority shareholder Altice filed a firm offer to buy the 20% interest held by Vivendi in Numericable-SFR, at 40 per share, totaling approximately 3.9 billion. On February 27,, Vivendi s Supervisory Board accepted Numericable-SFR s offer, signing final agreements to buy the 20% interest held by Vivendi. The acquisition was completed on May 6,, half of it paid by Numericable-SFR as part of a share repurchase plan authorized by the Shareholders Meeting of April 28,, combined with a cash payment, and the other half to be paid by Altice. The share repurchase plan by Numericable-SFR in the amount of,948 million was financed through an RCF drawdown of,050 million (the total amount available having been increased in from 750 million to,25 million) and the balance from the Group s available cash. At its meeting of May 28,, the Board of Directors decided to cancel the treasury shares (48,693,922 shares), reducing consolidated equity by,948 million. Also as part of the agreement signed with Vivendi: (i) In early May, Vivendi paid to Numericable-SFR 6 million under the price adjustment procedure agreed between the parties for the acquisition of SFR. The price adjustment was recognized as follows: - in the Group s restated consolidated financial statements as of December 3, 204: recognition of payment owed to Vivendi under Other current financial assets in the amount of 20 million (corresponding to the price adjustment as measured at the acquisition date) through a reduction of provisional goodwill recognized in the acquisition of SFR; 0

12 (ii) (iii) - in the consolidated financial statements as of September 30, : recognition of a financial expense in the amount of 4 million (shown in Other financial expenses ). Vivendi permanently waived the earn-out payment of 750 million which would have been owed by Numericable-SFR to Vivendi if EBITDA - Capex reached at least 2 billion in any given fiscal year by December 3, The Group reported net financial income of million (excluding tax effects) for the first half of, corresponding to the discounted value of the earn-out in the Group s non-current financial liabilities at December 3, 204, as well as deferred tax income of 40.5 million in the first half of. The amount of million was recognized as financial income as there was no factor indicating that it formed part of the acquisition price of 0% of the acquired Numericable-SFR securities. Vivendi undertook to repay to SFR, should the tax authorities definitively disallow the merger of SFR and Vivendi Telecom International (VTI) signed in December 20, up to 7 million that SFR had paid to it as part of its inclusion in Vivendi s tax consolidation group. 3.2 Data gathering by the Competition Authority at the Group s premises on April 2, Accused by some of its competitors that the Group and SFR anticipated the Competition Authority s decision of October 3, 204 authorizing the Group s takeover of SFR, the Competition Authority, overseen by the data privacy commission, gathered data from Group locations to identify factors that may indicate that it had acted prematurely on the expectation that this concentration would be authorized. The Group disputes the facts put forward by its competitors.

13 4 Reconciliation of operating income to adjusted EBITDA The following table shows the reconciliation of the operating income in the consolidated financial statements to adjusted EBITDA: September September (in millions of euros) 204 restated Operating income, Depreciation, amortization and impairment, SFR and Virgin acquisition expenses 3 7 Restructuring costs 24 3 Costs relating to stock option plans 7 4 CVAE (Cotisation sur la Valeur Ajoutée des Entreprises ), a French business value-added contribution Includes costs related to litigation, gains and losses on disposals of property, plant and equipment, intangible assets and the impact of contract renegotiation in the period. Adjusted EBITDA is the key indicator used by the Group to measure performance. This financial indicator is not defined in IFRS. Adjusted EBITDA excludes certain items that Numericable-SFR considers not relevant to its recurring operating activities. 5 Segment information 62 9 Other non-recurring costs 22 Adjusted EBITDA 3, The following tables show revenues and adjusted EBITDA broken down by the three operating segments defined by the Group: B2C/B2B/Wholesale. 5. Revenues September 30 September 30 (in millions of euros) 204 restated B2C 5, B2B, Wholesale Total 8, Adjusted EBITDA September 30 September 30 (in millions of euros) 204 restated B2C, B2B Wholesale Total 3,

14 6 Net Financial income (expense) The gross cost of debt corresponds to the interest expense on Senior Facilities and derivatives. It includes a 85 million expense corresponding to fair value gains and losses on derivatives not qualifying for hedge accounting. The gross cost of debt is reported directly in the Statement of Income. Financial income and other financial expenses are detailed below: September 30 September 30 (in millions of euros) 204 restated Extinction of the earn-out liability to Vivendi Interest income on cash 3 4 Claim against Lehman Brothers - Miscellaneous 0 0 Interest income Cost of extinguishing debt (refinancing) - (89) SFR price adjustment (4) - Provisions and unwinding of discounting (7) () Interest on financial liabilities excluding Senior (9) (4) Facilities Miscellaneous (7) (4) Other financial expenses (28) (98) 7 Income tax expense For interim reporting, the tax expense or tax income on profit or loss is determined in accordance with IAS 34, based on the best estimate of the annual average tax rate expected for the full fiscal year, restated for non-recurring items in the period which are recorded as incurred. 8 Earnings per share 3

15 The following table shows the weighted average number of ordinary shares used for calculating basic and diluted earnings per share: (number of shares) September 30 September Weighted average number of ordinary shares 464,643,473 23,942,02 Impact of dilutive instruments: Stock option plans 5,22,365 - Weighted average number of shares outstanding - diluted 469,765,838 23,942,02 9 Goodwill September 30 December 3 (in millions of euros) 204 restated Net carrying amount Balance at beginning of year 2,580,484 Provisional goodwill on acquisition of SFR and Virgin Mobile Adjustment of initial recognition of LTI Telecom goodwill Adjustment of initial recognition of SFR and Virgin Mobile goodwil -,457 - (5) - (355) Balance at end of year 2,580 2,580 The net carrying amount of goodwill can be broken down by segment as follows: September 30 December 3 (in millions) 204 restated B2C Operations B2B Operations Provisional goodwill SFR and Virgin,0,0 Total 2,580 2,580 Provisional goodwill allocation Given the completion dates of the acquisitions of SFR and Virgin (November 28, 204 and December 4, 204, respectively), the interim condensed consolidated financial statements for the nine-month period ended September 30, were prepared using provisional amounts for certain assets acquired and liabilities assumed for which the Purchase Price Accounting (PPA) analysis is still in progress, due to the volume of data to be processed and the complexity of some issues. The PPA for both SFR and Virgin will be completed in the last quarter of based on expert analyses. Consequently, the amount of goodwill is provisional and will be subject to revision in the annual accounts based on the final measurement of the fair value of the assets acquired and the liabilities assumed. 4

16 As of December 3, 204, a portion of the goodwill related to the SFR and Virgin acquisitions was allocated to intangible assets in the form of: - capitalization of customer acquisition costs for a net carrying amount of 9 million; this amount, net of deferred tax, was allocated to goodwill in the amount of 56 million; - capitalization of internal costs related to network development and information systems, costs for introducing Service Access Fees, and costs for the refurbishment of set-top boxes returned by customers, for a net carrying amount of 27 million; this amount, net of deferred tax, was allocated to goodwill in the amount of 68 million. The purchase prices are also expected to be allocated to the following key assets of SFR and Virgin: - BtoB and BtoC customer relationships, that will be valued using the multi-period excess earnings approach. Their remaining useful life will be based on their economic life; - the SFR tradename, encompassing all associated tradenames such as SFR Business Team and Red. It will be valued based on a relief-from royalty approach; - licenses held by the group (UMTS, GSM and LTE), the network and related assets. These assets will be valued based on revenue or cost approaches. Their remaining useful lives will be based on their economic lives. Therefore, certain identifiable assets having a limited life, future operating results may be significantly affected, mainly by depreciation and amortization charges related to these identifiable assets acquired. The residual goodwill will be explained by the synergies expected from these acquisitions (complementarity of networks, streamlining of costs, capital expenditure synergies) which are currently being implemented, as well as the ability to attract future clients. Impairment The Group re-examines the values of the assets of its Cash Generating Units whenever events or changes in the economic environment pose an impairment risk. As of September 30, the Group had not identified any signs of impairment that would require a goodwill impairment test. 0 Cash and cash equivalents September 30 December 3 (in millions of euros) 204 restated Cash 48 9 Cash equivalents (a) Cash and cash equivalents See Note 7 - Restated information a) Cash equivalents, as of September 30, and December 3, 204, mainly consisted of moneymarket UCITS. 5

17 Equity As of September 30,, following the cancellation of treasury shares as described in Note 3., Numericable SFR s share capital, based on the number of shares outstanding on that date, amounted to 438,245,303, comprising 438,245,303 ordinary shares with a par value of each.. Change in share capital Date Transaction Number of shares outstanding December 3, ,939,225 May 28, Cancellation of treasury shares (48,693,922) September 30, 438,245,303.2 Treasury shares As indicated in Note 3., in early May the Group launched the buyback of 48,693,922 of its own shares from Vivendi. These shares were then cancelled on May 28,. In addition, in early 204, the Group signed a liquidity contract with Exane BNP Paribas in order to improve the liquidity of its securities and the regularity of their prices on NYSE Euronext Paris. As of September 30, the Group held 40,387 treasury shares as part of the liquidity contract..3 Reserves related to items of other comprehensive income (in millions of euros) Attributable to owners of the company Hedging instruments Actuarial gains and losses Other items Deferred taxes Total items of other comprehensive income Balance at December 3, (2) - - (2) Change (207) (29) Balance at September 30, 204 (207) (2) - 79 (3) Change 39 (3) (0) (4) 2 Balance at December 3, 204 (69) (5) (0) 64 (09) Change 00 - () (37) 62 Balance at September 30, (69) (5) () 27 (48) 6

18 2 Financial liabilities Financial liabilities break down as follows: (in millions of euros) September 30, Current Non-current Total December 3, 204 restated September 30, December 3, 204 restated September 30, December 3, 204 restated Bonds ,4 8,572 9,57 8,735 Bank borrowing ,853 3,967 4,924 3,983 Derivative instruments Borrowings and financial debt ,052 2,539 4,65 2,78 Finance lease debts Perpetual subordinated notes ("TSDI") Deposits received from customers Bank overdrafts Vivendi earn-out Other Other financial liabilities Total financial liabilities ,247 3,349 4,547 3,627 As of September 30,, this includes (i) a 59 million debt related to the implementation of a receivables securitization contract and (ii) a 4 million debt related to the implementation of a reverse factoring contract. 2. Net financial debt Net financial debt as defined and utilized by the Group can be broken down as follows: September December 30 3 (in millions of euros) 204 restated Bonds 9,90 8,670 Bank borrowing 4,980 4,047 Finance lease debts Other financial liabilities 8 70 Liability items contributing to net financial debt (a) 4,347 2,856 Cash and cash equivalents Derivative instruments, Asset items contributing to net financial debt (b),873,532 Net financial debt (a) - (b) 2,474,325 (a) Liability items correspond to the nominal value of financial liabilities excluding accrued interest, the EIR impact, perpetual subordinated notes, operating debts (customer deposits and debt incurred under the reverse factoring contract) and the Vivendi earn out, which are translated at closing rates. (b) Asset items consist of cash and cash equivalents, and the value of derivatives, which, as of September 30,, show a positive currency translation impact of,750 million and an interest rate loss of 6 million. The corresponding figures at December 3, 204 were a positive translation impact of,063 million and an interest rate loss of 5 million. 7

19 2.2 Fair value hierarchy of financial assets and liabilities No significant events occurred in the ninth-month period ended September 30, to affect the fair value of financial assets and liabilities (including no transfers into or out of a fair level value and no change in the measurement methods used). 3 Litigation In the normal course of business, the Group is drawn into a number of lawsuits and governmental, arbitration and administrative proceedings. This Note discloses all significant disputes that have arisen or developed since the publication of the December 3, 204 consolidated financial statements that may have a material impact on the Group s financial position. 3. DSP 92 A disagreement arose between the Hauts-de-Seine department ( CG92 ) and Sequalum regarding the terms of performance of a public service concession ( THD Seine ) signed on March 3, 2006 between Hautsde-Seine Department and the business consortium consisting of Numericable, SFR Collectivités and Eiffage. The purpose of the concession was to create a very-high-speed fiber optic network in the Hauts-de- Seine region. Sequalum succeeded to the rights of the group of signatories. As of September 30,, the net carrying amount of the network built by Sequalum was approximately 40 million in the statutory financial statements and the company had received 27 million in subsidies from the General Council. At its meeting of October 7, 204, the Hauts-de-Seine General Council decided to terminate the public service concession with Sequalum for misconduct by the contractor effective June 30,. In September 204, the Hauts-de-Seine General Council submitted a demand for penalty payments in the amount of 45 million, for alleged delays in rolling out fiber optics and connecting buildings. As part of the enforcement of the contract and after sending the demand for payment, the General Council also asked the relevant financial institution to enforce the first-demand guarantee agreed by Sequalum of up to 0 million set forth in the agreement. To date, the financial institution has not met this request, on the grounds that the request was not in the required form and did not include the documentation needed to invoke the guarantee; the Nanterre Commercial Court to which this matter has been referred has dismissed the payment request. The demand for payment was contested in a motion filed with the Administrative Court of Cergy Pontoise on September 3, 204. Its enforcement and therefore the payment of the sums requested have been suspended pending a ruling on the merits. An additional demand for payment was issued on May 7, by the Hauts-de-Seine General Council for further delays cited by the contracting authority. The new demand, in the amount of 5 million, added to the initial demand for payment issued in September 204 for 45 million, was also challenged in form and substance in the Administrative Court. The General Council also again invoked the first-demand guarantee in the amount of 0 million. The Nanterre Commercial Court ruled that the case did not qualify for a summary hearing. This decision is being challenged before the Court of Appeal of Versailles. In addition, the Hauts-de-Seine started a specific proceeding in order to obtain from Sequalum a certain number of documents related to the concession and access to premises and equipment shared with 8

20 Numericable. The Council of State decision ordered Sequalum to transfer to the General Council only a relatively restricted number of documents but granted the Hauts-de-Seine access to the shared premises. The General Council s decision to terminate the concession was challenged in a lawsuit requesting damages. Should the competent courts consider the termination justified based on the grievances cited by the General Council, Sequalum would not only have to repay the public subsidies received for the DSP 92 project, amounting to the unamortized amount of subsidies, but it would also be liable for any consequential damages alleged by the General Council. Moreover, full ownership of the returnable DSP assets was transferred to the Hauts-de-Seine Department on June 30,. In consideration for these assets and even if the judge finds the termination wrongful, the Department will pay compensation to Sequalum amounting to at least the net value of said assets. It should be noted that on October 6, 204, Sequalum filed a motion in the Administrative Court of Cergy Pontoise requesting that the public service concession be terminated because of force majeure residing in the irreversible disruption of the structure of the contract. Following the termination of the DSP 92 agreement, the Group s management carried out a risk assessment of these procedures and found that there were too many uncertainties to be able to evaluate the potential risk to the Group. Under such conditions, the accounting criteria for recognizing a provision were not met. A claim has been filed by Sequalum in front of the administrative court in order to obtain the payment by the Hauts-de-Seine Department of the unpaid subsidy as well as late interest linked to it. Numericable states that it also has its own fiber optics in the Hauts-de-Seine Department to service its customers. Furthermore, DSP 92 accounts for a relatively insignificant percentage of Group revenue. 3.2 Disputes related to the white label contract between Numericable and Bouygues Telecom On July 24,, Bouygues Telecom had a summons and complaint served on NC Numericable and Completel regarding the basis of the very-high-speed contract signed between the three companies on May 4, 2009, and a complaint by Bouygues Telecom against those companies made in November 203. Bouygues Telecom alleged that NC Numericable and Completel had breached various contractual and precontractual provisions and asked the Commercial Court not only to annul certain contractual terms but also to order those companies to pay a minimum of 53 million in restitution. NC Numericable and Completel intend to challenge all the demands by Bouygues Telecom. 3.3 Tax audit regarding the SFR/VTI merger Under the agreement signed on February 27, between Vivendi, Altice France and Numericable-SFR, Vivendi agreed to repay to SFR any taxes and levies charged to SFR for fiscal year 20 that SFR had paid to Vivendi at that time, subject to a maximum of 7 million covering the entire period that SFR was part of the Vivendi tax group, if the 20 merger of SFR and VTI is ruled invalid in tax terms. Vivendi and Altice/Numericable-SFR have agreed to work together to challenge the tax authorities. 9

21 4 Commitments and contractual obligations The main changes to the commitments relating to the acquisition of SFR are disclosed in Note 3 on significant events in the period. The Competition Authority has asked the Group to sell Completel s DSL network. In the absence of an acceptable offer, the Group has decided to record an impairment, over the nine-month period ended September 30,, against the entire carrying amount of those assets, this having however no material impact on the Group s financial statements. No other significant event impacted the commitments and contractual obligations received or given as described in the 204 financial statements. 5 Related party transactions In the nine-month period ended September 30,, the type of related party transactions did not significantly differ from those reported as of December 3, Consolidating entity The consolidated financial statements of Numericable-SFR are included in the consolidated financial statements of Altice N.V, a company listed in the Netherlands. 7 Restated information 7. Consolidated statement of financial position The consolidated statement of financial position as of December 3, 204 has been restated: - for the price adjustment related to the takeover of SFR and Virgin as described in Note 3. (reduction in Goodwill through the Other current financial assets line item of 20 million for SFR and 5 million for Virgin) in accordance with IFRS 3; - for the recognition of intangible assets as disclosed in Note 9 ( 224 million reduction in Goodwill after deferred tax) in accordance with IFRS 3; - for several reclassifications as a result of the change in the presentation of the statement of financial position explained in Note.. The following table shows the reconciliation of the consolidated statement of financial position as of December 3, 204 to the restated statement of financial position: 20

22 December 3 IFRS 3 Reclassification December 3 (in millions of euros) 204 Adjustments 204 published restated Goodwill 2,935 (355) - 2,580 Intangible assets 4, ,558 Property, plant and equipment 5, ,897 Investments in associates Other non-current financial assets,049 - (,049) - Financial assets - -,003,003 Deferred tax assets 634 (37) Other non-current assets Non-current assets 24,840 (3) 4 24,73 Inventories Trade and other receivables 2,82 - (82) 4 2,730 Current income tax receivable Cash and cash equivalents Other current financial assets Current assets 3, (8) 3,99 Total Assets 28,74 (6) (5) 28,704 Consolidated equity 7, ,975 Non-current financial liabilities 3,349 - (3,349) 2 - Long term Borrowings and financial liabilities - - 2, ,539 Other non-current financial liabilities Non-current provisions Deferred tax liabilities Other non-current liabilities Non-current liabilities 4, ,302 Current financial liabilities (283) 2 - Short-term borrowings and financial liabilities Other current financial liabilities /4 99 Trade payables and other current liabilities 5,62 - (5,62) 3 - Trade payables and other liabilities - - 5,04 3 5,04 Current income tax liabilities Current provisions 37 (6) - 32 Other current liabilities Current liabilities 6,438 (6) (5) 6,428 Total liabilities 28,74 (6) (5) 28,704 Non-current operating assets (other than financial) reclassified under a new dedicated caption titled Other noncurrent assets ). 2 Financial liabilities reclassified into two separate categories: i) borrowings and financial liabilities and ii) other financial liabilities. The breakdown of the two captions is presented in Note 2. 3 Trade payables and other current liabilities reclassified as i) trade payables and other liabilities and ii) other current liabilities. Other current liabilities as of December 3, 204 include short-term deferred income ( 59 million). 4 Reclassification of notes receivable in cash and cash equivalents ( 77 million) and current financial liabilities (- 5 million). 2

23 7.2 Consolidated statement of income The statement of income for the nine-month period ended September 30, 204 was restated following the change in presentation explained in Note.. The following table shows the reconciliation of the published statement of income for the nine-month period ended September 30, 204 to the restated statement of financial performance: (in millions of euros) September 30 Reclassification September published restated Revenues Purchasing and subcontracting - (236) (236) Other operating expenses () (29) (220) Staff costs and employee benefit expenses (8) 32 2 (86) Depreciation, amortization and impairment (230) - (230) Other non-recurring income and expenses - (0) 3 (0) Purchases and subcontracting services (465) Taxes and duties (24) 24 - Provisions (0) Other operating income 66 (66) 2 - Operating income Financial income 5-5 Cost of gross financial debt (285) (50) 5 (335) Other financial expenses (48) 50 5 (98) Net financial income (expense) (427) 0 (427) Share in net income (loss) of associates Income before taxes (24) 0 (24) Income tax income (expense) Net income (loss) from continuing operations (78) 0 (78) Net income (loss) from discontinued operations Net income (78) 0 (78) - Attributable to owners of the company (78) - (78) - Attributable to non-controlling interests (0) - (0) The purchasing and subcontracting caption combines the direct costs related to sales (TV, telephony, DATA, etc.) and subcontracting costs. Other operating expenses include the following costs: Customer Service, Marketing, Network, Selling, general and administrative expenses, Taxes and duties. These costs were previously combined for the most part under the External purchases and Taxes and duties captions. 2 Staff costs and employee benefit expense is now shown net of capitalized payroll, previously presented under Other operating income in the published financial statements. 3 This category combines Group income/expenses considered non-recurring. 4 Provisions are now broken down in the new cost expense captions. 5 The cost of gross financial debt corresponds to the interest expense on the Group s Senior Facility Agreement and now includes the amortization of borrowing expenses (using the effective interest method), exchange rate gains/losses on the Senior Facility, and the fair value impact of derivatives related to the Senior Facility. These items had previously been included in Other financial expenses. 22

24 7.3 Statement of cash flows The statement of cash flows as of September 30, 204 was restated following the change in presentation explained in Note.. The following table shows the reconciliation of the published statement as of September 30, 204 to the restated statement: (in millions of euros) September 30 Reclassification September published restated Net income attributable to owners of the company (78) - (78) Adjustments: Depreciation, amortization and provisions Share of net income (loss) of associates (0) - (0) Gain (loss) on asset disposals (4) - (4) Net financial income (expense) Income tax expense (income) (36) - (36) Cost of gross financial debt 285 (285) - Change in fair value of interest rate derivatives (79) 79 Foreign currency differences, net 97 (97) Other non-cash operating gains and losses 4 (38) 3 Income tax paid () - () Change in working capital requirement 7 (64) (47) Net cash flow from operating activities Acquisition of property, plant and equipment and intangible assets (25) (23) Acquisition of held-for-sale financial assets (2) - (2) Disposals of property, plant and equipment and intangible assets 4-4 Change in working capital related to property, plant and () () equipment and intangible asset Change in restricted cash (8,894) - (8,894) Subsidies and grants received () 2 - Net cash flow used by investing activities (9,42) (25) (9,68) Issuance of debt, /3,65 Repayment of debt (2,659) 2 3 (2,638) Change in other financial liabilities - (6) 3 (6) Other cash flows from financing activities - (90) (90) Interest paid (283) 66 (26) Net cash flow from (used by) financing activities 8, ,69 Net increase (decrease) in cash and cash equivalents (87) (0) (87) (275) Net cash and cash equivalents at begining of period 0-0 Net cash and cash equivalents at end of period

25 Adjustments now include the entire interest income whereas previously only the cost of gross debt, the change in the fair value of derivatives, and foreign currency differences were neutralized. As a result of these reclassifications: - the Other non-cash items caption represents the non-cash expense of stock option plans, in the amount of 3 million - the Interest paid line item presents the cash impact of interest on the Senior Facilities ; - the Other cash flows from financing activities line item mainly includes the cost of extinguishing debt repaid in May 204 in the amount of 89 million 2 Asset acquisitions now include finance-lease based acquisitions in the amount of 25 million net of subsidies received ( million) through a change in other financial liabilities. 3 The Issuance of debt and Repayment of debt line items correspond only to Senior Facilities, as changes in other financial liabilities are now posted to a separate line item (accordingly, 5 million of the Issuance of debt line item was reclassified to the Change in other financial liabilities line item and 2 million of the Repayment of debt line item was reclassified to the Change in other financial liabilities line item). 8 Events after the end of the reporting period On October 22, Numericable-SFR announced that it had priced two new Term Loans, a $.34 billion Term Loan and a 500 million Term Loan. The Term Loans mature in January 2023 and bear interest at LIBOR/EURIBOR plus 4.00% with a 0.75% LIBOR/EURIBOR floor. Both loans were issued at an OID of 98.50% of their nominal amount. The $.34 billion Term Loan has been swapped to.8 billion with a margin of EURIBOR plus 4.5%. These financing activities improved the weighted average maturity (from 5.9 to 6. years) and the weighted average cost of debt of Numericable-SFR increased from 4.8% to 4.9%. The proceeds from the Term Loans, together with cash on balance sheet and the funds available under the existing Revolving Credit Facility, will be used by Numericable-SFR to make the EUR 2.5 billion distribution to shareholders of Numericable-SFR to be deducted from additional paid-in capital, that was announced on October 4, 24

26 9 Condensed consolidated pro forma financial information 9. Condensed consolidated pro forma statement of income for the nine-month period ended September 30, 204 September 204 (in millions of euros) Numericable- SFR historical consolidated financial statements SFR Virgin Adjustments Amount Pro forma Note Numericable- SFR pro forma financial information Revenues 995 7, (94) 9.2.a 8,597 Operating expenses (783) (6,886) (29) b (7,933) Operating income (68) 664 Financial income (expense) (427) (55) (2) (40) 9.2.c (623) Income tax income (expense) 36 (64) (3) d (90) Share of net income (loss) of associates 0 (7) - - (7) Net income (78) 84 5 (67) (56) - Attributable to owners of the company (78) 78 5 (67) 9.2.e (62) - Attributable to non-controlling interests e 6 Basis of preparation 9.2 Notes to the condensed consolidated pro forma financial statements as of September 30, 204 The condensed consolidated pro forma financial information presented below was prepared in accordance with Article of the AMF General Regulations and AMF Instruction relating to pro forma financial information. These financial statements include a condensed pro forma statement of income for the nine-month period ended September 30, 204, intended to present the impact of the acquisitions of SFR Group (SFR SA, SIG 50 and their subsidiaries, including Telindus, acquired by SFR Group on April 30, 204) and of Virgin Mobile Group (Omer Telecom Limited and its subsidiaries) and the associated financing, as if these Transactions (acquisitions, financing of acquisitions and refinancing transactions connected with the acquisitions) had occurred on January, 204. The pro forma financial information is presented by way of example only and does not reflect the transactions or financial position that Numericable-SFR would have conducted or attained had the Transactions occurred on January, 204. The pro forma financial information does not reflect Numericable-SFR s future operating results or its future financial situation either. It does not include the restructuring and/or consolidation costs that could be incurred following the Acquisitions, and which should not have a sustained impact on the Group. The pro forma financial information does not include tax income/expense that would result from a tax restructuring of the Group. 25

27 The condensed consolidated pro forma financial information is based on preliminary estimates and assumptions that Numericable-SFR considers to be reasonable. In particular, the value of goodwill calculated on the acquisitions of SFR and Virgin Mobile was still provisional at September 30, and will be reviewed on the basis of the final measurement of the fair value of the assets acquired and liabilities assumed, which will be reflected by the recognition of certain identifiable acquired assets such as licenses, trademarks and customer bases that have a limited lifetime and will be amortized. Therefore, future operating results may be significantly affected by amortization charges related to these identifiable assets acquired. Only adjustments that can be documented and reliably estimated on the date of preparation of the condensed consolidated pro forma financial information are taken into account. For example, the condensed consolidated pro forma financial information does not reflect potential cost savings or synergies. The change in the fair value of derivatives in the pro forma information was calculated on the basis of the market conditions and hedges existing in May 204 when financing the Acquisitions, which is why there are no pro forma adjustments in that respect. The condensed consolidated pro forma financial information does not reflect any specific item such as provisions relating to contractual provisions for change in control or any consolidation costs that could be incurred as a result of the Acquisitions. Non-recurring items that are directly attributable to the Transactions and that can be documented and reliably estimated are included in the pro forma adjustments. Historical financial information The condensed consolidated pro forma financial information should be read in conjunction with the Notes to these financial statements. They have been prepared on the basis of: - The Numericable-SFR interim condensed consolidated financial statements for the nine-month period ended September 30, 204; - The interim condensed combined financial statements for SFR S.A., SIG 50 S.A. and their subsidiaries for the nine-month period ended September 30, 204; - Virgin Mobile s consolidated financial information for the nine- month period ended September 30, 204. As Virgin Mobile's previous fiscal year ended on March 3, 204, the financial information for the nine-month period ended September 30, 204 has been reconstituted from: o the consolidated financial statements as of March 3, 204; o the consolidated financial information for the nine-month period ended December 3, 203 (which has not been audited or subjected to review); o the consolidated financial information for the six-month period ended September 30, 204 (which has not been audited or subjected to review); Intragroup transactions Following the Acquisitions, all transactions between Numericable-SFR, the SFR Group and the Virgin Mobile Group are considered to be intragroup transactions. Accordingly, all transactions between Numericable-SFR, the SFR Group and the Virgin Mobile Group have been eliminated when preparing the pro forma financial information. Pro forma adjustments Unless otherwise indicated, the pro forma adjustments are determined before any tax impact. 26