Unaudited Interim Cndensed Cnslidated Financial Statements As at and fr the six mnth perid ended 31 July 2017
Telefónica Celular del Paraguay S.A. Cnslidated Financial Statements fr the six-mnth perid ended Unaudited interim cnslidated statement f cmprehensive incme fr the perid ended Six mnths ended Six mnths ended 30 June 2016 Revenue... 1,534,299 1,582,725 Cst f sales... (312,925) (375,481) Grss prfit... 1,221,374 1,207,244 Operating expenses... (499,173) (490,184) Depreciatin... (185,916) (169,153) Amrtizatin... (68,248) (61,407) Other perating incme (expenses), net... (56) (991) Operating prfit... 467,981 485,509 Interest expense... (102,759) (91,689) Interest and ther financial incme... 3,185 4,853 Exchange gain (lss), net... 6,471 99,432 Prfit befre tax... 374,878 498,105 Incme tax expense... (62,116) (66,581) Net prfit and cmprehensive incme fr the perid. 312,762 431,524 Attributable t: Equity hlders f the cmpany 312,762 431,524 The accmpanying ntes are an integral part f these unaudited interim cndensed cnslidated financial statements.
Telefónica Celular del Paraguay S.A. Cnslidated Financial Statements fr the six-mnth perid ended Unaudited interim cnslidated statement f financial psitin as at Ntes Six mnths ended Year ended 31 December 2016 ASSETS Nn-Current Assets Intangible assets, net... 5 893,726 915,045 Prperty, plant and equipment, net... 4 1,762,341 1,960,626 Deferred taxatin... 23,203 23,397 Other nn-current assets... 24,544 26,856 Amunts due t related parties 8 33,360 69,203 Ttal Nn-Current Assets... 2,737,174 2,995,127 Current Assets Inventries... 79,130 50,139 Trade receivables, net... 388,916 413,249 Amunts due frm related parties... 8 326,729 579,151 Prepayments and accrued incme... 179,501 176,833 Supplier advances fr capital expenditure... 6,756 10,366 Other current assets... 35,877 56,991 Cash and cash equivalents... 136,253 310,922 Ttal Current Assets... 1,153,162 1,597,651 Assets held fr sale 9 109,387 - TOTAL ASSETS... 3,999,723 4,592,778 EQUITY AND LIABILITIES EQUITY Share capital and premium... 164,008 164,008 Legal reserve... 50,110 50,110 Retained prfits... 124,440 164,112 Prfit fr the perid / year attributable t equity hlders... 312,762 611,985 Parents wnership interests... 651,320 990,215 TOTAL EQUITY... 651,320 990,215 LIABILITIES Nn-current Liabilities Debt and financing... 6 2,194,628 2,296,539 Prvisins and ther nn-current liabilities... 150,925 156,534 Ttal nn-current liabilities... 2,345,553 2,453,073 Current Liabilities Debt and financing... 6 42,510 57,669 Payables and accruals fr capital expenditure... 274,871 395,842 Other trade payables... 179,427 164,170 Amunts due t related parties... 8 94,373 64,999 Accrued interest and ther expenses... 159,623 192,383 Current incme tax liabilities... 27,150 52,131 Prvisins and ther current liabilities... 199,679 222,296 Ttal current liabilities... 977,633 1,149,490 Liabilities directly assciated with assets held fr sale 9 25,217 - TOTAL LIABILITIES... 3,348,403 3,602,563 TOTAL EQUITY AND LIABILITIES... 3,999,723 4,592,778 The accmpanying ntes are an integral part f these unaudited interim cndensed cnslidated financial statements.
Telefónica Celular del Paraguay S.A. Cnslidated Financial Statements fr the six-mnth perid ended Unaudited interim cnslidated statement f cash flws fr the six-mnth perid ended Ntes Six mnths ended Six mnths ended 30 June 2016 Cash flws frm perating activities Prfit befre taxes... 374,878 498,105 Adjustments: Interest expense... 102,759 91,689 Interest and ther financial incme... (3,185) (4,853) Other nn-perating expenses, net... (6,471) (99,432) Adjustments fr nn-cash items: Depreciatin and amrtizatin... 254,164 230,560 Lss n dispsal f assets... 56 991 722,201 717,060 (Increase) decrease in trade receivables, prepayments and ther current assets... 43,138 (126,197) (Increase) decrease in inventries... (28,992) (14,379) Increase (decrease) in trade and ther payables... (51,404) 113,688 Changes in wrking capital... (37,258) (26,888) Interest paid... (80,055) (101,393) Interest received... 282 3,942 Taxes paid... 10 (158,862) (5,535) Net cash prvided by perating activities... 446,308 587,186 Cash flws fr investing activities: Purchase f prperty, plant and equipment... 4 (75,369) (199,721) Purchase f intangible assets and license renewals... 5 (177,218) (295,393) Debt and ther financing granted t / repaid by related parties, net... - (61,898) Other... - 294 Net cash used by investing activities... (252,587) (556,718) Cash flws fr financing activities: Repayment f debt and financing... (22,132) (46,202) Prceeds frm issuance f debt and financing... - - Payment f dividends... (335,613) (60,340) Net cash used by financing activities... (357,745) (106,542) Exchange lsses n cash and cash equivalents... (10,645) (3,208) Net decrease in cash and cash equivalents... (174,669) (79,282) Cash and cash equivalents at the beginning f the year... 310,922 203,984 Cash and cash equivalents at the end f the perid... 136,253 124,702 The accmpanying ntes are an integral part f these unaudited interim cndensed cnslidated financial statements.
Telefónica Celular del Paraguay S.A. Cnslidated Financial Statements fr the six-mnth perid ended Unaudited interim cnslidated statement f changes in equity fr the six mnths ended PYG millin Number f shares Share Capital Retained prfits Legal reserves Ttal equity Balance as f 31 December 2015 (audited) 6,524 274,008 350,328 50,110 674,446 Ttal cmprehensive incme fr the perid - - 431,524-431,524 Dividends - - (186,216) - (186,216) Balance as f 30 June 2016 (unaudited) 6,524 274,008 595,636 50,110 919,754 Ttal cmprehensive incme fr the perid - - 611,985-611,985 Dividends - - (186,216) - (186,216) Return f capital t sharehlders 3,476 (110,000) - - (110,000) Balance as f 31 December 2016 (audited) 10,000 164,008 776,097 50,110 990,215 Ttal cmprehensive incme fr the perid 312,762 312,762 Dividends - - (651,657) - (651,657) Balance as f (unaudited) 10,000 164,008 437,202 50,110 651,320 The accmpanying ntes are an integral part f these unaudited interim cndensed cnslidated financial statements.
fr the six-mnth perid ended 30 June, 2017 Ntes t the unaudited interim cnslidated financial statements 1. ORGANIZATION Telefónica Celular del Paraguay S.A. (the Cmpany ), a Paraguayan cmpany, and its subsidiaries: Teledeprtes Paraguay S.A. and Lthar Systems S.A. (the Grup r Telecel ) is a Paraguayan grup prviding cmmunicatins, infrmatin, entertainment, and slutins in Paraguay. The Cmpany maintains multiple license cntracts with Paraguay s telecm regulatr, Cmisión Nacinal de Telecmunicacines (Cnatel), t perate cellular and cable businesses in Paraguay. The Cmpany was frmed in 1992. Telecel is a whlly wned subsidiary f Millicm Internatinal III N.V. The ultimate parent cmpany is Millicm Internatinal Cellular S.A., a Luxemburg Sciété Annyme whse shares are traded n the Stckhlm stck exchange under the symbl MIC and ver the cunter in the US under the symbl MIICF. The general administratin f the Cmpany is lcated at Zavala Cue esq. Artilleria, Fernand De La Mra, Paraguay. 2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES These interim cndensed cnslidated financial statements f the Cmpany are unaudited. They are presented in Paraguayan Guaranies and have been prepared in accrdance with Internatinal Accunting Standard ( IAS ) 34 Interim Financial Reprting issued by the Internatinal Accunting Standard Bard (IASB). In the pinin f management, these unaudited cndensed interim cnslidated financial statements reflect all adjustments that are necessary fr a prper presentatin f the results fr interim perids. The Cmpany s peratins are nt affected by significant seasnal r cyclical patterns These unaudited cndensed interim cnslidated financial statements shuld be read in cnjunctin with the cnslidated financial statements fr the year ended 31 December 2016. These financial statements are prepared in accrdance with cnslidatin and accunting plicies cnsistent with the 2016 cnslidated financial statements. The fllwing changes t standards effective fr annual perids starting after 1 January 2017 did nt have a significant impact n the Grup: IAS Amendments t IAS 7, Statement f cash flws n disclsure initiative. These amendments are as part f the IASB initiative t imprve presentatin and disclsure in financial reprts; Amendments t IAS 12, Incme taxes n Recgnitin f deferred tax assets fr unrealised lsses. Update n the implementatins f IFRS 15, Revenue frm cntracts with custmers and IFRS 9, Financial Instruments : IFRS 15: We plan t adpt the accunting standard n 1 January 2018 and anticipate a meaningful impact n ur Grup financial statements, but we think it is premature t quantify this impact due primarily t the high vlume f transactins that we prcess. Frm a qualitative standpint, we expect that sme revenue will be recgnized earlier, as a larger prtin f the ttal cnsideratin received in a bundled cntract will be attributable t the cmpnent delivered at cntract inceptin. Therefre, we expect this will prduce a shift frm service revenue (which will decrease) t the benefit f Telephne and Equipment revenue. the cst incurred t btain a cntract (mainly cmmissins) will be capitalized in the balance sheet and amrtized ver the expected custmers retentin perid. N material changes fr the purpse f determining whether the Grup acts as principal r an agent in the sale f prducts. As a result, we expect this will prduce a net increase in bth revenue and EBITDA in the first year. We anticipate that ther adjustments will be less meaningful than the tw adjustments explained abve. 6
fr the six-mnth perid ended 2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Cntinued) Additinally, the Grup has decided t take sme f the practical expedients freseen in the Standard, such as: The Grup will nt adjust the transactin price fr the means f a financing cmpnent whenever the perid between the transfer f a prmised gd r service t a custmer and the assciated payment is ne year r less; when the perid is mre than ne year the significant financing cmpnent shuld be adjusted, if material. The Grup will disclse in the Grup Financial Statements the transactin price allcated t unsatisfied perfrmance bligatins nly fr cntracts that have an riginal expected duratin f mre than ne year (e.g. unsatisfied perfrmance bligatins fr cntracts that that have an riginal duratin f ne year r less will nt be disclsed). The Grup will apply the practical expedient nt t disclse the price allcated t unsatisfied perfrmance bligatins, if the cnsideratin frm a custmer directly crrespnds t the value t the custmer f the entity s perfrmance t date (i.e, if billing = revenue). IFRS 9: The Grup has started the implementatin prject in early 2017 fr IFRS 9 and des expect it t have an impact n impairment f trade receivables and cntracts assets (IFRS 15) as well as n amunts due frm jint ventures and related parties with the applicatin f the expected credit lss mdel. Hwever, the Grup des nt expect this impact t be material n the cnslidated financial statements taken as a whle. 3. DISPOSAL OF SUBSIDIARIES, JOINT VENTURES AND NON-CONTROLLING INTERESTS During the six-mnth perids ended and 2016, the Grup did nt make any significant acquisitin. 4. PROPERTY, PLANT AND EQUIPMENT During the six mnths ended, the Cmpany added prperty, plant and equipment fr PYG 59,584 millin. Cash used fr prperty, plant and equipment additins PYG millin Six mnths ended 30 June 2017 2016 Additins... 59,584 155,038 Change in advances t suppliers... (3,781) 4,907 Change in accruals and payables fr intangibles... 19,566 39,776 Cash used frm cntinuing peratins fr additins... 75,369 199,721 5. INTANGIBLE ASSETS During the six mnths ended the Cmpany added intangible assets f PYG 83,839 millin. Cash used fr intangible asset additins PYG millin Six mnths ended 30 June 2017 2016 Additins... 83,839 317,444 Change in advances t suppliers... 342 (1,840) Change in accruals and payables fr intangibles... 93,037 (20,211) Cash used frm cntinuing peratins fr additins... 177,218 295,393
fr the six-mnth perid ended 6. DEBT AND FINANCING The ttal amunt f debt and financing is repayable as fllws: Six mnths ended Year ended 31 December 2016 Due within: One year... 42,510 57,669 One-tw years... 110,790 85,020 Tw-three years... 136,560 136,560 Three-fur years... 118,080 136,075 Fur-five years... 50,220 66,960 After five years... 1,778,978 1,871,924 Ttal debt... 2,237,138 2,354,208 Bank financing In July 2008, Telecel entered int an 8 year $100 millin lan with the Eurpean Investment Bank ( EIB ). The lan bears interest at rates between $ LIBOR 90 plus 0.234% and $ LIBOR 90 plus 0.667%. The EIB lan is guaranteed fr cmmercial risks by Ryal Bank f Sctland ( RBS ). The cmmissin guarantee fee is 1.25% per annum. The lan was repaid in June 2017. The utstanding amunt as at was PYG nil (31 December 2016: PYG 57,669 millin). In the last quarter f 2015, Telecel btained tw new lng-term lans frm lcal banks Banc ITAU and Banc Cntinental. Bth lans are denminated in Paraguayan guaranies and bear a fixed annual interest rate f 9%. In the third quarter f 2016, Telecel btained a new lng-term lan frm Banc Cntinental, denminated in Paraguayan guaranties, and bear a fixed annual interest rate f 10%. As f, the cmbined balance f such lans is PYG millin 592,080. Senir Ntes On 7 December 2012, Telecel issued $ 300 millin aggregate principal amunt f 6.75% Senir Unsecured Ntes (the 6.75 Senir Ntes ) due n 13 December 2022. The 6.75% Senir Ntes were issued at 100% f the aggregated principal amunt. Distributin and ther transactin fees f $7 millin reduced the ttal prceeds frm issuance t $293 millin. The 6.75% Senir Ntes have a 6.75% per annum cupn with interest payable semiannually in arrears n 13 June and 13 December. The effective interest rate is 7.12%. The 6.75% Senir Ntes are general unsecured bligatins f the Telecel and rank equal in right f payment with all future unsecured and unsubrdinated bligatins f Telecel. The 6.75% Senir Ntes are unguaranteed. Telecel has ptins t partially r fully redeem the 6.75% Senir Ntes as fllws: (i) (ii) Full r partial redemptin at any time prir t 13 December 2017, fr the highest f, 100% f the principal t be redeemed r, the present value f the remaining scheduled payments f principal t be redeemed and interest Full r partial redemptin at any time n r after 13 December 2017 fr the fllwing percentage f principal t be redeemed, plus accrued and unpaid interest and all ther amunts dues, if any: 13 December 2017 103.375% 13 December 2018 102.25% 13 December 2019 101.125% 13 December 2020 100.00% 13 December 2021 100.00% These ptins represent embedded derivatives which, in accrdance with IAS 39 have been valued and determined t be clsely related t the underlying bnd. (iii) Redemptin f up t 35% f the riginal principal f the 6.75% Senir Ntes if, prir t 13 December 2015, Telefónica Celular del Paraguay S.A. receives prceeds frm issuance f shares, at a redemptin price f 106.75% f the principal amunt t be redeemed plus accrued and unpaid interest and all ther amunts due, if any, n the redeemed ntes. If Telefónica Celular del Paraguay S.A. experiences a Change f Cntrl Triggering Event, defined as a rating decline resulting frm a change in cntrl, each hlder will have the right t require repurchase f its ntes at 101% f their principal amunt plus accrued and unpaid interest and all ther amunts due, if any.
fr the six-mnth perid ended 6. DEBT AND FINANCING (CONT.) The utstanding amunt as at was PYG 1,645,057 millin (December 2016: PYG 1,704,524 millin) Fair value f financial liabilities Other than the items disclsed belw, the fair values f financial assets and financial liabilities apprximate their carrying values as at and 31 December 2016: Carrying Value 30 June 2017 (unaudited) 31 December 2016 30 June 2017 (unaudited) Fair Value 31 December 2016 US$ 000 FINANCIAL LIABILITIES Other debt and financing... 402,363 408,226 419,957 395,929 7. COMMITMENTS AND CONTINGENCIES Operatinal envirnment Telecel is perating in an emerging market, where the regulatry, plitical, technlgical, and ecnmic envirnments are evlving. As a result, there are uncertainties that may affect future peratins, the ability t cnduct business, freign exchange transactins, and debt repayments. In the nrmal curse f business, Telecel als faces uncertainties regarding taxatin, intercnnectin with ther netwrks, license renewals, and tariff arrangements. These uncertainties can have a significant impact n the Cmpany s lng-term ecnmic perfrmance. Litigatin The Cmpany and its subsidiaries are cntingently liable with respect t lawsuits and ther matters that arise in the nrmal curse f business. As f, the ttal amunt f prvisins related t claims against the Grup s peratins was PYG 7,597 millin (December 2016: PYG 7,811 millin). While it is impssible t ascertain the ultimate legal and financial liability with respect t these claims, the ultimate utcme f these cntingencies is nt anticipated t have a material effect n the Grup s financial psitin and peratins. Lease cmmitments Operating Leases: The Grup had the fllwing annual perating lease cmmitments as f and 31 December 2016. Six mnths ended Year ended 31 December 2016 Operating lease cmmitments Within: ne year... 14,937 29,875 Between: ne t five years... 4,262 8,524 After: five years... 2,355 4,709 Ttal... 21,554 43,108 Operating leases are cmprised mainly f lease agreements relating t land and buildings. The perating lease terms and cnditins reflect nrmal market cnditins. Ttal perating lease expense was PYG 7,912 millin in the six mnths ended (30 June 2016: PYG 7,683 millin).
fr the six-mnth perid ended 7. COMMITMENTS AND CONTINGENCIES (Cntinued) Capital cmmitments As f, the Cmpany has fixed cmmitments t purchase netwrk equipment, land and buildings and ther fixed assets fr a value f PYG 252,306 millin (31 December 2016: PYG 882,818 millin). Dividends The ability f the Cmpany t make dividend payments is subject t, amng ther things, the terms f indebtedness and legal restrictins. 8. RELATED PARTY TRANSACTIONS The Cmpany cnducts transactins with its principal sharehlder, Millicm Internatinal Cellular S.A. ( Millicm ) and its subsidiaries. Transactins with related parties are cnducted n nrmal cmmercial terms and cnditins. The fllwing transactins were cnducted with related parties: Six mnths ended 30 June 2017 Six mnths ended 30 June 2016 Millicm Other Paraguayan peratins... 85,633 51,612 Millicm - Nn-Paraguayan cmpanies... (4,445) (3,952) Ttal purchases frm related parties... 81,188 47,660 As at, the Cmpany had the fllwing balances with related parties: Six mnths ended 30 June 2017 Year ended 31 December 2016 Receivables Millicm Other Paraguayan peratins... 335,623 320,205 Millicm Nn-Paraguayan cmpanies... 24,466 348,461 Ttal... 360,089 668,666 Payables Millicm Other Paraguayan peratins... 77,272 53,985 Millicm Nn-Paraguayan cmpanies... 17,101 11,014 Ttal... 94,373 64,999 9. ASSETS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE On 26 April 2017, the Grup annunced an agreement t sell and leaseback apprximately 1,400 wireless cmmunicatins twers in Paraguay t a subsidiary f American Twer Crpratin ( ATC ) whereby we agreed the sale f twer assets and t lease back a dedicated prtin f each twer t lcate its netwrk equipment in exchange fr cash. As a result f this transactin, Telecel will receive apprximately PYG 700 billin (equivalent t $125 millin) in cash. The prtins f the assets that will be transferred and that will nt be leased back are classified as assets held fr sale as cmpletin f their sale is highly prbable. At, Telecel had crrespnding assets held fr sale amunting t PYG 109,387 millin representing the prtin f twers sld but yet t be transferred t ATC. Asset retirement bligatins related t the twers f PYG 25,217 millin are classified as liabilities directly assciated with assets held fr sale. The prtin f the twers which will be leased back remained capitalized and classified under the captin Prperty, plant & equipment, net in the statement f financial psitin as at.
fr the six-mnth perid ended 10. TAXES PAID During the six-mnth perid ended, Telecel paid the remaining PYG 386,072 millin dividends related t the net prfit f FY 2016, as well as dividends f PYG 13,044 millin as an advance n FY 2017 net prfit. These dividend payments triggered tax payments f PYG 59,867 millin. In additin, Telecel paid PYG 76,097 millin n incme taxes advances. 11. SUBSEQUENT EVENTS Dividend advance In July 2017, Telecel s Bard f Directrs prpsed t the Annual General Meeting f Sharehlders a dividend advance f USD 50 millin. The advance was apprved and executed during the same mnth. IPS BID Lng Term Lan On July 7, 2017, Telecel signed a five-year lan agreement with the IPS (Institut de Previsin Scial) and the Inter- American Develpment Bank fr a ttal amunt f PYG 367,000 millin (apprximately US$66 millin). The lan, denminated in lcal currency, will carry a 9.75% interest rate and start amrtizing in Q4 2019. *****