Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2018shares | |
Document Information [Line Items] | |
Entity Registrant Name | TELEFONICA BRASIL S.A. |
Entity Central Index Key | 1,066,119 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2018 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Shell Company | false |
Entity Emerging Growth Company | false |
Document Fiscal Year Focus | 2,018 |
Document Fiscal Period Focus | FY |
Common shares | |
Document Information [Line Items] | |
Shares Outstanding | 569,354,053 |
Preferred shares | |
Document Information [Line Items] | |
Shares Outstanding | 1,119,339,723 |
Consolidated Balance Sheets
Consolidated Balance Sheets - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Current assets | R$ 18362992 | R$ 16731666 |
Cash and cash equivalents | 3,381,328 | 4,050,338 |
Trade accounts receivable | 8,304,382 | 8,588,466 |
Inventories | 462,053 | 348,755 |
Income and social contribution taxes recoverable | 274,589 | 505,535 |
Taxes, charges and contributions recoverable | 4,674,218 | 2,058,455 |
Judicial deposits and garnishments | 313,007 | 324,638 |
Prepaid expenses | 581,743 | 446,439 |
Derivative financial instruments | 69,065 | 87,643 |
Other assets | 302,607 | 321,397 |
Non-current assets | 84,198,326 | 84,651,169 |
Short-term investments pledged as collateral | 76,934 | 81,486 |
Trade accounts receivable | 426,252 | 273,888 |
Taxes, charges and contributions recoverable | 3,222,262 | 743,285 |
Deferred taxes | 230,097 | 371,408 |
Judicial deposits and garnishments | 3,597,007 | 6,339,167 |
Prepaid expenses | 134,232 | 23,116 |
Derivative financial instruments | 26,468 | 76,762 |
Other assets | 47,105 | 88,935 |
Investments | 101,657 | 98,902 |
Property, plant and equipment | 34,115,327 | 33,222,316 |
Intangible assets | 42,220,985 | 43,331,904 |
TOTAL ASSETS | 102,561,318 | 101,382,835 |
LIABILITIES AND EQUITY | ||
Current liabilities | 17,160,820 | 17,862,531 |
Personnel, social charges and benefits | 782,630 | 723,380 |
Trade accounts payable | 7,642,782 | 7,447,100 |
Income and social contribution taxes payable | 12,009 | 4,479 |
Taxes, charges and contributions payable | 1,797,965 | 1,726,836 |
Dividends and interest on equity | 4,172,916 | 2,396,116 |
Provisions and contingencies | 377,929 | 1,434,911 |
Deferred income | 525,509 | 372,561 |
Loans, financing and debentures | 1,464,166 | 3,033,441 |
Derivative financial instruments | 16,538 | 5,239 |
Other liabilities | 368,376 | 718,468 |
Non-current liabilities | 13,793,471 | 14,058,946 |
Personnel, social charges and benefits | 11,903 | 23,284 |
Taxes, charges and contributions payable | 39,245 | 49,448 |
Deferred taxes | 1,982,952 | 709,325 |
Provisions and contingencies | 5,881,396 | 6,709,839 |
Deferred income | 250,526 | 350,637 |
Loans, financing and debentures | 4,675,271 | 5,428,400 |
Derivative financial instruments | 22,845 | 15,412 |
Other liabilities | 929,333 | 772,601 |
TOTAL LIABILITIES | 30,954,291 | 31,921,477 |
Equity | 71,607,027 | 69,461,358 |
Capital | 63,571,416 | 63,571,416 |
Capital reserves | 1,213,532 | 1,213,522 |
Income reserves | 4,324,170 | 2,463,228 |
Other comprehensive income accumulated | 29,225 | 21,328 |
Additional proposed dividends | 2,468,684 | 2,191,864 |
TOTAL LIABILITIES AND EQUITY | R$ 102561318 | R$ 101382835 |
Consolidated Statements of Inco
Consolidated Statements of Income - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Income | |||
Net operating income | R$ 43462740 | R$ 43206832 | R$ 42508459 |
Cost of sales | (21,025,767) | (20,272,530) | (20,823,014) |
Gross profit | 22,436,973 | 22,934,302 | 21,685,445 |
Operating income (expenses) | (12,980,789) | (16,302,065) | (15,317,426) |
Selling expenses | (12,832,741) | (13,136,474) | (12,455,366) |
General and administrative expenses | (2,598,970) | (2,443,105) | (2,793,386) |
Other operating income | 4,077,003 | 464,182 | 968,479 |
Other operating expenses | (1,626,081) | (1,186,668) | (1,037,153) |
Operating income | 9,456,184 | 6,632,237 | 6,368,019 |
Financial income | 4,112,640 | 1,755,958 | 2,781,359 |
Finance expenses | (2,285,487) | (2,659,002) | (4,015,900) |
Equity pickup | (5,847) | 1,580 | 1,244 |
Income before taxes | 11,277,490 | 5,730,773 | 5,134,722 |
Income and social contribution taxes | (2,349,232) | (1,121,983) | (1,049,480) |
Net income for the year | R$ 8928258 | R$ 4608790 | R$ 4085242 |
Common shares | |||
Consolidated Statements of Income | |||
Basic and diluted earnings per share | R$ 4.96 | R$ 2.56 | R$ 2.27 |
Preferred shares | |||
Consolidated Statements of Income | |||
Basic and diluted earnings per share | R$ 5.45 | R$ 2.82 | R$ 2.50 |
Consolidated Statements of Othe
Consolidated Statements of Other Comprehensive Income - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Other Comprehensive Income | |||
Net income for the year | R$ 8928258 | R$ 4608790 | R$ 4085242 |
Other comprehensive income (losses) that may be reclassified into income (losses) in subsequent periods | 8,309 | 9,644 | (14,062) |
Gains (losses) on derivative financial instruments | (2,450) | (2,417) | 4,803 |
Taxes | 832 | 822 | (1,633) |
Cumulative Translation Adjustments (CTA) on transactions in foreign currency | 9,927 | 11,239 | (17,232) |
Other comprehensive income (losses) not to be reclassified into income (losses) in subsequent periods | (63,151) | (113,588) | (156,211) |
Unrealized gains ( losses) on financial assets at fair value through other comprehensive income | (625) | 338 | 83 |
Actuarial losses and limitation effect of the assets of surplus plan | (93,491) | (171,296) | (236,767) |
Taxes | 30,965 | 57,370 | 80,473 |
Other comprehensive losses | (54,842) | (103,944) | (170,273) |
Total comprehensive income for the year | R$ 8873416 | R$ 4504846 | R$ 3914969 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - BRL (R$) R$ in Thousands | Capital | Special goodwill reserve | Other capital reserves | Treasury shares | Legal reserve | Tax incentive reserve | Expansion and modernization reserve | Retained earnings | Proposed additional dividends | Other comprehensive income accumulated | Total |
Equity at beginning of period at Dec. 31, 2015 | R$ 63571416 | R$ 63074 | R$ 1297295 | R$ 87805 | R$ 1703643 | R$ 6928 | R$ 700000 | R$ 1287223 | R$ 25468 | R$ 68567242 | |
Payment of additional dividend | (1,287,223) | (1,287,223) | |||||||||
Prescribed equity instruments, including unclaimed dividends and interest on equity | R$ 221559 | 221,559 | |||||||||
Preferred shares delivered referring to the judical process of expansion plan | 2 | 15 | 17 | ||||||||
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives | 10,141 | (10,141) | |||||||||
Other comprehensive income (loss) | (156,266) | (14,007) | (170,273) | ||||||||
Net income for the year | 4,085,242 | 4,085,242 | |||||||||
Allocation of income: | |||||||||||
Legal reserve | 204,262 | (204,262) | |||||||||
Interim interest on equity | (2,172,145) | (2,172,145) | |||||||||
Reversal expansion and Modernization Reserve | (700,000) | 700,000 | |||||||||
Expansion and Modernization Reserve | 550,000 | (550,000) | |||||||||
Additional proposed dividends | (1,913,987) | 1,913,987 | |||||||||
Equity at end of period at Dec. 31, 2016 | 63,571,416 | 63,074 | 1,297,297 | (87,790) | 1,907,905 | 17,069 | 550,000 | 0 | 1,913,987 | 11,461 | 69,244,419 |
Payment of additional dividend | (1,913,987) | (1,913,987) | |||||||||
Prescribed equity instruments, including unclaimed dividends and interest on equity | 101,778 | 101,778 | |||||||||
Repurchase of preferred shares | (32) | (32) | |||||||||
Preferred shares delivered referring to the judical process of expansion plan | 2 | 2 | |||||||||
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives | 10,815 | (10,815) | |||||||||
Equity transactions | (59,029) | (59,029) | |||||||||
Other comprehensive income (loss) | (113,811) | 9,867 | (103,944) | ||||||||
Net income for the year | 4,608,790 | 4,608,790 | |||||||||
Allocation of income: | |||||||||||
Legal reserve | 230,439 | (230,439) | |||||||||
Interim interest on equity | (2,416,639) | (2,416,639) | |||||||||
Reversal expansion and Modernization Reserve | (550,000) | 550,000 | |||||||||
Expansion and Modernization Reserve | 297,000 | (297,000) | |||||||||
Additional proposed dividends | (2,191,864) | 2,191,864 | |||||||||
Equity at end of period at Dec. 31, 2017 | 63,571,416 | 63,074 | 1,238,268 | (87,820) | 2,138,344 | 27,884 | 297,000 | 2,191,864 | 21,328 | 69,461,358 | |
Effects of the initial adoption of IFRS 9 and 15, net of taxes | (138,663) | (138,663) | |||||||||
Payment of additional dividend | (2,191,864) | (2,191,864) | |||||||||
Prescribed equity instruments, including unclaimed dividends and interest on equity | 152,770 | 152,770 | |||||||||
Corporate Income Tax Return (DIPJ) adjustments - Tax incentives | 11,529 | (11,529) | |||||||||
Equity transactions | 10 | 10 | |||||||||
Other comprehensive income (loss) | (62,739) | 7,897 | (54,842) | ||||||||
Net income for the year | 8,928,258 | 8,928,258 | |||||||||
Allocation of income: | |||||||||||
Legal reserve | 446,413 | (446,413) | |||||||||
Interim interest on equity | (4,550,000) | (4,550,000) | |||||||||
Reversal expansion and Modernization Reserve | (297,000) | 297,000 | |||||||||
Expansion and Modernization Reserve | 1,700,000 | (1,700,000) | |||||||||
Additional proposed dividends | (2,468,684) | 2,468,684 | |||||||||
Equity at end of period at Dec. 31, 2018 | R$ 63571416 | R$ 63074 | R$ 1238278 | R$ 87820 | R$ 2584757 | R$ 39413 | R$ 1700000 | R$ 0 | R$ 2468684 | R$ 29225 | R$ 71607027 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities | |||
Income before taxes | R$ 11277490 | R$ 5730773 | R$ 5134722 |
Adjustment for: | |||
Depreciation and amortization | 8,368,623 | 7,853,734 | 7,654,406 |
Foreign exchange on loans and derivative financial instruments | 30,664 | 57,832 | 75,075 |
Monetary losses | 801,912 | 543,852 | 620,570 |
Equity pickup | 5,847 | (1,580) | (1,244) |
Losses (gains) on write-off/sale of assets | (63,881) | (74,337) | (451,215) |
Provision for impairment - accounts receivable | 1,533,660 | 1,481,015 | 1,348,221 |
Change in liability provisions | (80,333) | (93,479) | 273,664 |
Write-off and reversals for impairment - inventories | (45,223) | (45,089) | (36,898) |
Pension plans and other post-employment benefits | 52,885 | 31,511 | 5,243 |
Provisions for tax, labor, civil and regulatory contingencies | 1,098,251 | 999,419 | 985,176 |
Interest expense | 497,797 | 926,220 | 1,049,553 |
Other | (14,089) | (8,737) | (72,610) |
Changes in assets and liabilities | |||
Trade accounts receivable | (1,603,002) | (1,274,181) | (1,739,550) |
Inventories | (68,127) | 106,393 | 230,116 |
Taxes recoverable | (5,849,648) | (330,398) | (823,360) |
Prepaid expenses | 41,166 | 11,051 | 105,845 |
Other assets | (20,225) | 82,109 | 23,202 |
Personnel, social charges and benefits | 47,870 | (42,830) | 53,005 |
Trade accounts payable | 1,056,817 | 121,577 | (707,998) |
Taxes, charges and contributions | 223,059 | 180,915 | 601,970 |
Provisions for tax, civil, labor and regulatory contingencies | (3,928,925) | (1,592,860) | (1,108,045) |
Other liabilities | (249,571) | (472,771) | (284,465) |
Total adjustments to reconcile profit (loss) | 1,835,527 | 8,459,366 | 7,800,661 |
Cash generated from operations | 13,113,017 | 14,190,139 | 12,935,383 |
Interest paid | (494,931) | (859,586) | (926,223) |
Income and social contribution taxes paid | (676,659) | (689,493) | (568,335) |
Net cash (used in) generated by operating activities | 11,941,427 | 12,641,060 | 11,440,825 |
Cash flows from investing activities | |||
Additions to PP&E, intangible assets and others | (8,517,458) | (8,367,660) | (7,470,869) |
Cash received from sale of PP&E items | 9,053 | 20,672 | 778,819 |
Cash paid for acquisition of companies, net of cash acquired | (206,649) | ||
Net payment of derivative contracts on acquisition of GVT | 10 | 31,804 | |
Redemption of (increase in) judicial deposits | 2,832,062 | 83,500 | (202,525) |
Dividend and interest on equity received | 3 | ||
Other | 111 | ||
Net cash (used in) generated by investing activities | (5,676,333) | (8,438,222) | (6,894,572) |
Cash flows from financing activities | |||
Payment of loans, financing and debentures | (2,893,219) | (4,485,495) | (2,171,100) |
Loans and financing raised | 3,055,876 | 466,629 | |
Received of derivative financial instruments | 181,117 | 107,846 | 132,410 |
Payment of derivative financial instruments | (85,124) | (267,254) | (239,379) |
Payment for reverse split of shares | (164) | ||
Dividend and interest on equity paid | (4,136,878) | (3,668,551) | (2,966,384) |
Treasury shares | (32) | ||
Net cash (used in) generated by financing activities | (6,934,104) | (5,257,610) | (4,777,988) |
Increase (decrease) in cash and cash equivalents | (669,010) | (1,054,772) | (231,735) |
Cash and cash equivalents at beginning of the year | 4,050,338 | 5,105,110 | 5,336,845 |
Cash and cash equivalents at end of the year | R$ 3381328 | R$ 4050338 | R$ 5105110 |
OPERATIONS
OPERATIONS | 12 Months Ended |
Dec. 31, 2018 | |
OPERATIONS | |
OPERATIONS | 1) OPERATIONS a) Background information Telefônica Brasil S.A. (the “Company” or “Telefônica Brasil”) is a publicly-held corporation with the corporate purpose of operating telecommunications services; development of activities necessary or useful for the execution of those services, in accordance with the concessions, authorizations and permissions granted to them; exploitation of value-added services; operation of integrated solutions, management and provision of services related to: (i) data center, including hosting and colocation; (ii) storage, processing and management of data, information, texts, images, videos, applications and information systems and similar; (iii) information technology; (iv) information and communication security; (v) telecommunications; and (vi) electronic security systems; licensing and sublicensing of software of any nature, among others. 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”), with headquarters in Spain and present in several countries of Europe and Latin America. At December 31, 2018 and 2017, Telefónica S.A. (“Telefónica”), the Group holding company, held total direct and indirect interest in the Company of 73.58% (Note 23). The Company is registered in the Brazilian Securities Commission ("CVM") as a publicly-held company under Category A (issuers authorized to trade any marketable securities) and has shares traded on the B3 (company resulting from the combination of activities between BM&FBovespa and CETIP – Central Custody and Settlement of Securities). The Company is also listed in the Securities and Exchange Commission ("SEC"), of the United States of America, and its American Depositary Shares ("ADSs") are classified under level II, backed only by preferred shares and traded on the New York Stock Exchange ("NYSE"). b) Operations The Company operates in the rendering of: (i) Fixed Switched Telephone Service Concession Arrangement ("STFC"); (ii) Multimedia Communication Service ("SCM", data communication, including broadband internet); (iii) Personal Mobile Service ("SMP"); and (iv) Conditioned Access Service ("SEAC" - Pay TV), throughout Brazil, through concessions and authorizations, as established in the General Plan of Concessions ("PGO"). Service concessions and authorizations are granted by Brazil's Telecommunications Regulatory Agency ("ANATEL"), the agency responsible for the regulation of the Brazilian telecommunications sector under the terms of Law No. 9472 of July 16, 1997 - General Telecommunications Law ("Lei Geral das Telecomunicações" - LGT), amended by Laws No. 9986, of July 18, 2000, and No. 12485, of September 12, 2011. The operation of such concessions is subject to supplementary regulations and plans. In accordance with the STFC service concession agreement, in every two years, during the agreement's 20-year term, valid until December 31, 2025, the Company shall pay a fee equivalent to 2% of its prior-year STFC revenue, net of applicable taxes and social contribution taxes (Note 22). In accordance with the authorization terms for the usage of radio frequencies associated with SMP, in every two years after the first renewal of these agreements, the Company shall pay a fee equivalent to 2% of its prior-year SMP revenue, net of applicable taxes and social contribution taxes (Note 22), and in the 15th year the Company will pay 1% of its prior-year revenue. The calculation will consider the net revenue from the application of Basic and Alternative Services Plans. These agreements can be extended only once for a term of 15 years. The Company's authorization terms ("TA") for the operation of SMP, according to the SMP General Authorization Plan ("PGA"), are: (i) Region I - TA n. 078/2012 / PVCP / SPV-ANATEL ; (ii) Region II - TA n ° 005/2010 / PVCP / SPV-ANATEL; and (iii) Region III - TA n ° 006/2010 / PVCP / SPV-ANATEL. The terms of authorization for the use of the radio frequency bands are granted based on the results obtained in the respective radio frequency auction conducted by ANATEL. The following is a summary of the authorizations for use of radio frequency bands, granted to the Company, according to the terms of authorization to operate the service in each region. Radiofrequency Band (MHz) License Expiration (Year) 450 MHz 14 2027 700 MHz 20 2029 800 MHz 25 2020-2028 900 MHz 5 2020-2023 1800 MHz 20-50 2020-2023 2100 MHz 20-30 2023 2500 MHz 40-60 2027-2031 c) Corporate events that occurred in 2018 and 2017 c.1) Corporate Restructuring - 2018 At the Extraordinary General Meeting ("AGE") held on November 30, 2018, the corporate restructuring was approved, with the merger of the wholly-owned subsidiary Telefônica Data SA ("TData") by the Company, with operational effects as from December 1, 2018. TData was a subsidiary of the Company based in Brazil, whose purpose was to provide services, including, without limitation, the provision of audio, video, image and text content, applications and the like, exploration of integrated solutions and the provision of value-added services. TData was the parent company of Telefônica Transportes e Logística Ltda. ("TGLog"), which exploits logistics activity; the administration and operation of general and customs warehouses throughout the national territory, among other logistics activities and of Terra Networks Brasil SA ("Terra Networks"), which provides digital services (value-added services ("SVA") and third parties and carrier billing, as well as mobile channels for sales and relationship) and advertising, with both companies headquartered in Brazil. The TData merger had the objective of standardizing the rendering of services, simplifying the Group current organizational and corporate structure, and assisting in the integration of the Company's business with TData. c.2) Acquisition of Terra Networks by Wholly-Owned Subsidiary - 2017 On July 3, 2017, the Company announced that its wholly-owned subsidiary TData has acquired all the shares representing the capital stock of Terra Networks, owned by SP Telecomunicações Participações Ltda. ("SPTE"), one of the controlling shareholders of the Company. The total price paid for the acquisition of shares issued by Terra Networks was R$ 250,000, in a single installment, with no need for any financing, using only the cash available of TData. Such value was calculated based on the economic value of Terra Networks, according to the discounted cash flow criterion, with a base date of April 30, 2017, based on an appraisal report contracted by the TData Board of Directors. The acquisition was subject to conditions usually applicable to this type of deal and was preceded by a legal and financial audit in relation to Terra Networks and valuation by an independent company. The acquisition was to expand and integrate the commercial offer of digital services that can add immediate value to the customer base of TData and of the Company, as well as generating TData service offers to Terra Networks' customer base and subscribers and, thanks to the national presence of Terra Networks' operation and expertise, generate leverage for TData advertising business. In addition, since the Company has the skills to create new digital media products for mobile and advertising and Terra Networks has know-how in selling, attending and operating digital services for specific customers, the acquisition by TData will also facilitate the synergy between the companies involved, in addition to maximizing the unification of the commercial conditions maintained with suppliers. |
BASIS OF PREPARATION AND PRESEN
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS | |
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS | 2) BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS a) Statement of compliance The consolidated financial statements were prepared and are presented in accordance with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). b) Basis of preparation and presentation The financial statements were prepared on a historical cost basis (except where different criteria are required) and adjusted to reflect the valuation of assets and liabilities measured at fair value or considering the mark-to-market valuation when such valuations are required by IFRS. The Statement of Cash Flows was prepared in accordance with IAS 7 - Statement of Cash Flows and reflects the changes in cash that occurred in the years presented using the indirect method. Assets and liabilities are classified as current when it is probable that their realization or settlement will occur in the next 12 months. Otherwise, they are classified and shown as non-current. The only exception relates to the balances of deferred tax assets and liabilities, which are classified and fully shown as non-current. The Board of Directors authorized the issue of these individual and consolidated financial statements at the meeting held on February 15, 2019. c) Functional and reporting currency The Company’s financial statements for the years ended December 31, 2018, 2017 and 2016 are presented in thousands of reais (unless otherwise stated). The Company’s functional and reporting currency is the Brazilian real. Transactions in foreign currency are translated into Brazilian reais as follows: (i) assets, liabilities and shareholders' equity (excluding capital stock and capital reserves) are translated at the closing exchange rate on the balance sheet date; (ii) expenses and revenues are translated at the average exchange rate, except for specific transactions that are converted by the transaction date rate; and (iii) the capital stock and capital reserves are converted by the transaction date rate. The gains and losses resulting from the conversion of investments abroad are recognized in the statement of comprehensive income. Gains and losses resulting from the translation of monetary assets and liabilities recorded between the exchange rate prevailing at the date of the transaction and the year-end closing (except for the conversion of investments abroad) are recognized in the income statement. d) Basis of consolidation The Company holds direct equity interests in subsidiaries and jointly-controlled subsidiaries. Below, we present the main information of the Company's investees. Equity interests Investees Type of investment At 12.31.18 At 12.31.17 Country (Headquarters) Core activity Telefônica Data S.A. ("TData") Subsidiary — 100.00 % Brazil Telecommunications Terra Networks Brasil S.A. ("Terra Networks") Subsidiary 100.00 % — Brazil Telecommunications Telefônica Transportes e Logística Ltda ("TGLog") Subsidiary 99.99 % — Brazil Transports and logistics POP Internet Ltda ("POP") Subsidiary 99.99 % 99.99 % Brazil Internet Aliança Atlântica Holding B.V. ("Aliança") Joint venture 50.00 % 50.00 % Brazil Holding of the telecommunications sector Companhia AIX de Participações ("AIX") Joint venture 50.00 % 50.00 % Holland Operation of underground telecommunications networks Companhia ACT de Participações ("ACT") Joint venture 50.00 % 50.00 % Brazil Technical assistance in telecommunication networks TData: The Company's direct and wholly-owned subsidiary until November 30, 2018, with headquarters in Brazil, had the purpose of providing various services, including, without limitation, the provision of audio, video, image and text content, applications and the like, to exploitation of integrated solutions and the provision of value-added services. On December 1, 2018, TData was merged into the Company (Note 1 c.1). Terra Networks: The Company's direct and wholly-owned subsidiary as at December 1, 2018 (Note 1 c.1), with headquarters in Brazil, has the purpose of providing digital services (own value-added services ("VAS") and third parties and carrier billing, as well as mobile channels for sales and relationship) and advertising. TGLog: The Company's direct subsidiary as at December 1, 2018 (Note 1 c.1), with its head office in Brazil, has as its object the provision of logistics activities; and the administration and operation of general and customs warehouses throughout the national territory, among other logistics activities. POP: The Company's direct subsidiary with headquarters in Brazil, is engaged in the performance of activities related to information technology, internet and any other networks; hosting services and the commercial operation of websites and portals; handling, provision and storage of information and data; sale of software, hardware, telecommunication equipment and electronics; development, licensing and maintenance of information systems and routines; development of electronic commerce; creation and administration of own and/or third-party databases; sale of publicity and advertising and, banner vehicles; and holding interest in other companies as member or shareholder, and may also form consortia and/or other forms of association. POP is the direct subsidiary of Innoweb Ltda ("Innoweb"), whose business purpose is to operate as an internet provider; performing information activities; all forms of telecommunications activities, including the transmission of voice, data and information; sale of telecommunications and electronic equipment and/or accessories; and holding interest in other companies as member or shareholder, and may also form consortia and/or other forms of association. Aliança: Joint venture, headquartered in Amsterdam, Netherlands, with 50% interest held by the Company, this entity is engaged in the acquisition and management of subsidiaries, and holding interest in companies of the telecommunications industry. AIX: Joint venture, headquartered in Brazil, with 50% interest held by the Company, this entity is engaged in holding interest in Consórcio Refibra, and in performing activities related to the direct and indirect operation of activities associated with the construction, completion and operation of underground networks for optical fiber ducts. ACT: Joint venture, headquartered in Brazil, with 50% interest held by the Company, this entity is engaged in holding interest in Consórcio Refibra, and in performing activities related to the rendering of technical support services for the preparation of projects and completion of networks, by means of studies required to make them economically feasible, and monitor the progress of Consortium-related activities. Interest held in subsidiaries or joint ventures is measured under the equity method in the individual financial statements. In the consolidated financial statements, investments and all asset and liability balances, revenues and expenses arising from transactions and interest held in subsidiaries are fully eliminated. Investments in joint ventures are measured under the equity method in the consolidated financial statements. e) Segment reporting Business segments are defined as components of a company for which separate financial information is available and regularly assessed by the operational decision-making professional in definition of how to allocate funds to an individual segment and in the assessment of segment performance. Considering that: (i) all officers and managers' decisions are based on consolidated reports; (ii) the Company and its subsidiaries’ mission is to provide their customers with quality telecommunications services; and (iii) all decisions related to strategic planning, finance, purchases, short- and long-term investments are made on a consolidated basis, the Company and its subsidiaries operate in a single operating segment, namely the provision of telecommunications services. f) Significant accounting practices Significant and relevant accounting policies for the understanding of the basis of recognition and measurement applied in the preparation of the Company's financial statements are included in the respective notes to which they refer. The accounting policies adopted in the preparation of the consolidated financial statements for the year ended December 31, 2018 are consistent with those used in the preparation of the consolidated annual financial statements for the year ended December 31, 2017, except for the changes required by the new pronouncements, interpretations and amendments approved for the IASB, which came into effect as of January 1, 2018, as follows: Standards and amendments IFRS 9 Financial Instruments IFRS15 Revenue from Contracts with Customers Clarifications to IFRS 15 Revenue from Contracts with Customers , issued on April 12, 2016 Amendments to IFRS 2 Classication and Valuation of Share Based Transactions Improvements to IFRS Standards 2014-2016 Cycle The adoption of part of these standards, changes and interpretations did not have a significant impact on the financial position of the Company and its subsidiaries in the initial period of application. However, for IFRS 9 and IFRS 15, there was a significant impact on the consolidated financial position at the time of their adoption and prospectively. IFRS 9 Financial Instruments IFRS 9 simplified the current measurement model for financial assets and established three main categories: (i) amortized cost; (ii) fair value through profit or loss; and (iii) fair value through other comprehensive income (“OCI”), depending on the business model and the characteristics of the contractual cash flows. Regarding recognition and measurement of financial liabilities there were not significant changes from current criteria except for the recognition of changes in own credit risk in OCI for those liabilities designated at fair value through profit or loss. IFRS 9 introduced the expected credit loss model as the new model for impairment losses on financial assets. This new model requires that the expected credit losses be recorded from the initial recognition of the financial asset. The Company applied the simplified approach and recorded lifetime expected losses on all trade receivables. Consequently, the application of the new requirements led to an acceleration in the recognition of impairment losses on its financial assets, mainly trade receivables. In addition, the new standard introduced a new and less restrictive hedge accounting model, requiring an economic relationship between the hedged item and the hedging instrument and that the hedge ratio be the same as that applied by the entity for risk management, criteria for documenting hedge relationships. The main changes are related to the documentation of policies and hedging strategies, as well as the estimation and timing of recognition of expected losses on receivables from customers. The Company has decided to apply the option that allows not to restate comparative periods to be presented in the year of initial application. From the analysis performed on the transactions of the 2017 financial year, the Company recognized on January 1, 2018, a decrease of 364 million reais in retained earnings, before deferred taxes, as a result of the increase in the bad debt provision balance on receivables from customers. In addition to the effects on provision for customer receivables defaults mentioned above, the adoption of IFRS 9 had impacts on the classification and measurement of financial assets and liabilities, as presented in the table below. Classification by category Classification in accordance with IAS 39 Classification in accordance with IFRS 9 Financial Assets Trade accounts receivable Loans and receivables Amortized cost Derivative transactions Hedges (economic) Measured at fair value through comprehensive income Financial Liabilities Derivative transactions Hedges (economic) Measured at fair value through comprehensive income The complete information on the Company's financial assets and liabilities is disclosed in Note 31. IFRS 15 Revenues from Contracts with Customers IFRS 15 establishes a global structure to determine when to recognize revenue from ordinary activities and by what amount. The basic principle is that an entity must recognize revenue from ordinary activities in a way that represents the transfer of goods or services committed with the customer in exchange for an amount that reflects the consideration that the entity expects to be entitled in exchange for such assets or services. With the adoption of IFRS 15, for bundled packages that combine multiple wireline, wireless, data, internet or television goods or services, the total revenue is now allocated to each performance obligation based on their standalone selling prices in relation to the total consideration of the package and will be recognized when (or as) the obligation is satisfied, regardless of whether there are undelivered items. Consequently, when bundles include a discount on equipment, there is an increase in revenues recognized from the sale of handsets and other equipment, in detriment of ongoing service revenue over subsequent periods. To the extent that the packages are marketed at a discount, the difference between the revenue from the sale of equipment and the consideration received from the customer upfront is recognized as a contract asset in the statement of financial position. All incremental costs to obtain a contract (sales commissions and other acquisition costs of third parties) are accounted for as prepaid expenses (assets) and amortized over the same period as the revenue associated with that asset. Similarly, certain contract fulfillment costs are also deferred to the extent that they relate to performance obligations that are satisfied over time. Revenue from the sale of handsets to dealers is accounted for at the time of delivery and not at the time of sale to the final customer, as there is no performance obligation after delivery to dealers. Certain changes of the contract have been accounted for as a retrospective change (i.e. as a continuation of the original contract), while other modifications are to be considered prospectively as separate contracts, such as the original contract end and the creation of a new one. The Company adopted, as authorized by the technical pronouncement, the retrospective method modified with the cumulative effect of the initial application recognized as an adjustment to the opening balance of retained earnings on the date of the initial adoption. Therefore, comparative amounts of previous periods will not be restated. To facilitate the understanding and comparability of information, the Company discloses in Note 35 the consolidated income statement for the year then ended December 31, 2018, excluding the effects of adopting IFRS 15. IFRS 15 also allows the application of certain practical arrangements to facilitate the implementation of the new criteria. The Company has assessed which of them will be adopted in the implementation of the standard in order to reduce complexity in its application. The main practical expedients that the Company adopted were: Completed contracts: the Company did not apply the standard retrospectively to those contracts that were completed at January 1, 2018. Portfolio approach: the Company applied the requirements of the standard to groups of contracts with similar characteristics, since, for the clusters identified, the effects do not differ significantly from an application on a contract by contract basis. Financial component: was not be considered significant when the period between the moment when the promised good or service is transferred to a customer and the moment when the customer pays for that good or service is one year or less. Costs to obtain a contract: these costs were recognized as an expense when incurred if the amortization period of the asset that the entity would otherwise recognize was one year or less. The process of implementing the new requirements involved the introduction of modifications to the current information systems, the implementation of new IT tools, and changes in the processes and controls of the entire revenue cycle in the Company. This process of implementation in the Company entailed a high degree of complexity due to factors such as many contracts, numerous data source systems, as well as the need to make complex estimates. From the analysis performed on the transactions of the 2017 financial year, considering commercial offers as well as the volume of contracts affected, the Company recognized on January 1, 2018 an increase in retained earnings of 156 million reais, before deferred taxes, referring to first-time recognition of contract assets that lead to the early recognition of revenue from the sale of goods and the activation and deferral of incremental costs related to obtaining contracts and contract fulfillment costs that result in the subsequent recognition of customer acquisition costs and other sales. The following table shows the changes in contractual assets and liabilities and incremental costs of the Company (excluding the effects of sales and income taxes). Contract assets (1) Contract assets, Provision Contract Contractual Incremental gross for losses assets, net liabilities (3) costs (2) Initial adoption on 01.01.18 (33,196) (178,897) Reclassification on 01.01.18 (Note 21) — — — (383,688) — Additions 587,733 (512) 587,221 (7,271,614) 262,518 Write-offs, net (585,675) — (585,675) 7,301,992 (190,772) Balances as of 12.31.18 195,733 (33,708) 162,025 (532,207) 255,391 Current 195,733 (33,708) 162,025 (504,473) 170,703 Non-current — — — (27,734) 84,688 The amounts in the above table are classified in the balance sheets as follows: (1) Accounts receivable (Note 4); (2) Prepaid expenses (Note 6); and (3) Deferred income (Note 21). The amounts of additions and write-offs of the above table refers mainly to the recharges and usage of prepaid credits. Below, we present the expected periods of realization of contractual liabilities. Year 2019 (504,473) 2020 (16,753) 2021 (2,383) 2022 onwards (8,598) Total (532,207) New IFRS pronouncements, issues, amendments and interpretations of the IASB In addition to the previously issued and amended standards, at the date of preparation of these financial statements, the following issues and changes in IFRS and IFRICs had been published but were not mandatory. The Company does not anticipate the early adoption of any pronouncement, interpretation or amendment that has been issued before application is mandatory for the year ended December 31, 2018. Mandatory application: annual periods Standards and amendments beginning on or after Improvements to IFRS Standards 2015-2017 Cycle January 1, 2019 IFRS 16 Leases January 1, 2019 IFRIC23 Uncertainty over Income Tax Treatments January 1, 2019 Amendments to IFRS 9 Prepayment Features with Negative Compensation January 1, 2019 Amendments to IAS 28 Long-term Interest in associates and Joint Ventures January 1, 2019 Amendments to IFRS 10 and IAS 28 Sale or Constituition of Assets between an Investidor and its Associate or Joint Venture January 1, 2019 Based on the analyses made to date, the Company estimates that the adoption of these standards, amendments and interpretations will not have a significant impact on the consolidated financial statements in the initial period of adoption, except for the effects of IFRS 16, where there is an expectation of a significant impact on the consolidated financial position at the time of its adoption and prospectively. IFRS 16 Leases IFRS 16 requires lessees to recognize assets and liabilities arising from all leases (except for short-term leases and leases of low-value assets) in the statement of financial position. The Company acts as a lessee in a significant number of leases on different assets, such as towers and the respective land where they are located, circuits, offices, stores and commercial real estate, mainly. A significant portion of these contracts are accounted for as operating leases under the current lease standard, with lease payments being recognized on the straight-line basis over the contract term. The Company concluded the process of estimating the impact of this new standard on such contracts. This analysis included the estimation of the lease term, based on the non-cancellable period and the periods covered by options to extend the lease when the exercise depends only on Company and where such exercise is reasonably certain. This depended, to a large extent, on the specific facts and circumstances applicable to the main class of assets in the telecom industry (technology, regulation, competition, business model, among others). In addition to this, the Company adopted assumptions to calculate the discount rate, which was based on the incremental borrowing rate of interest for the estimated term. On the other hand, the Company considered not to separately recognize non-lease components from lease components for those classes of assets in which non-lease components are not material with respect to the total value of the lease. The standard also allows for two transition methods: retrospectively for all periods presented, or a modified retrospective approach, where the cumulative effect of adoption is recognized at the date of initial application. The Company decided to adopt the modified retrospective approach. The Company has opted for the practical expedient that allows it to not re-evaluate whether a contract is or contains a lease on the date of the initial adoption of IFRS 16, but to directly apply the new requirements to all contracts that, under the current standard, have been identified as such as leasing. In addition, certain handbooks are available on the first application in connection with the right to use, asset measurement, discount rates, impairment, leases that terminate within twelve months of the date of first adoption, direct start-up costs, and contract term of leasing.Accordingly, the Company opted to adopt the following practical steps in the transition to the new criteria: (i) use of common discount rates for groups of contracts with similar characteristics in terms of term, contract object, currency and economic environment; (ii) application of the practical file that allows it not to adopt the new criteria for contracts that expire in 12 months from the date of the initial adoption; and (iii) exclusion of initial direct costs from the initial valuation of the asset by right of use on the date of the initial adoption. Based on the volume of contracts affected, as well as the magnitude of future lease commitments, as disclosed in Note 32, the Company expects the changes introduced by IFRS 16 to have a significant impact on its financial statements as of the date of its adoption, including the recognition in the balance of rights-of-use assets and their corresponding lease obligations in connection with most of the contracts that are classified as operating leases in accordance with current standards. In addition, the amortization of rights-of-use assets and the recognition of interest costs over the lease obligation in the income statements will replace the amounts recognized as lease expenses in accordance with current lease standards. The classification of lease payments in the statement of cash flows will also be affected by the requirements of the new lease standard. Based on the analysis made so far, the Company estimates that the changes introduced by IFRS 16 will have a significant impact on its financial statements as of the date of initial adoption, including recognition in the opening balance sheet for the year 2019 of a value between 8.4 and 9.2 billion reais as rights-of-use assets, in relation to most of the contracts that, under current regulations, are classified as operating leases, as a contra entry to the lease liability. g) Significant accounting judgments estimates and assumptions The preparation of the financial statements requires the use of certain critical accounting estimates and the exercise of judgment by the Company's management in applying of its accounting policies. These estimates are based on experience, better knowledge, information available at the end of the fiscal year, and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Settlement of transactions involving these estimates may result in values that are different from those recorded in the financial statements due to the criteria inherent in the estimation process. The Company reviews its estimates at least annually. The significant and relevant estimates and judgments applied by the Company in the preparation of these financial statements are presented in the following notes: trade accounts receivable (Note 4); income and social contribution taxes (Note 7); property, plant and equipment (Note 12); intangible assets (Note 13); provision and contingencies (Note 19); net operating income (Note 24); pension plans and other post-employment benefits (Note 30); and financial instruments and risk and capital management (Note 31). |
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS | 12 Months Ended |
Dec. 31, 2018 | |
CASH AND CASH EQUIVALENTS | |
CASH AND CASH EQUIVALENTS | 3 ) CASH AND CASH EQUIVALENTS a) Accounting policy These are financial assets classified at amortized cost or measured at fair value through profit or loss maintained in order to meet short-term cash commitments and not for investment or other purposes. The Company and its subsidiaries consider cash equivalents a short-term investment readily convertible into a known amount of cash and subject to insignificant risk of change in value. Short-term investments are classified as cash equivalents when redeemable within 90 days. b) Breakdown Cash and banks 205,598 117,799 Short-term investments 3,175,730 3,932,539 Total 3,381,328 4,050,338 Highly liquid short-term investments basically comprise Bank Deposit Certificates (“CDB”) and Repurchase Agreements kept at first-tier financial institutions, pegged to the Interbank Deposit Certificate (“CDI”) rate, with original maturities of up to three months, and with immaterial risk of change in value. Revenues generated by these investments are recorded as financial income. |
TRADE ACCOUNTS RECEIVABLE
TRADE ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2018 | |
TRADE ACCOUNTS RECEIVABLE | |
TRADE ACCOUNTS RECEIVABLE | 4 ) TRADE ACCOUNTS RECEIVABLE a) Accounting policy These are financial assets measured initially at fair value and subsequently, at amortized cost and are evaluated by the value of the services provided in accordance with the contracted conditions, net of estimated impairment losses. These include the services provided to customers, which were still not billed at the balance sheet date, as well as other trade accounts receivable related to the sale of cell phones, SIM cards, accessories, advertising and rent of IT equipment (“Soluciona TI” product). The Company measures the provision for estimated loss for impairment in an amount equal to the loss of credit expected for a lifetime. b) Critical estimates and judgments In determining whether the credit risk of a financial asset has increased significantly since the initial recognition and in estimating the expected credit losses, the Company considers reasonable and bearable information that is relevant and available. This includes quantitative and qualitative information and analysis, based on the Company's historical experience, credit assessment and considering forward-looking information. Although the Company believes that the assumptions used are reasonable, the results may be different. c) Breakdown Billed amounts 6,789,257 6,753,621 Unbilled amounts 2,454,810 2,481,364 Interconnection amounts 835,887 859,819 Amounts from related parties (Note 28) 148,814 201,021 Gross accounts receivable 10,228,768 10,295,825 Estimated impairment losses (1,498,134) (1,433,471) Total 8,730,634 8,862,354 Current 8,304,382 8,588,466 Non-current 426,252 273,888 Consolidated balances of non-current trade accounts receivable include: R$160,979 at December 31, 2018 (R$122,651 at December 31, 2017), relating to the business model of resale of goods to legal entities, receivable within 24 months. At December 31, 2018, the impact of the present value adjustment was R$16,672 (R$16,011 at December 31, 2017). R$93,434, at December 31, 2018 (R$45,031, at December 31, 2017), net of the present value adjustment relating to the portion of accounts receivable arising from negotiations on the bankruptcy process of companies from the OI group. At December 31, 2018, the impact of the present value adjustment was R$25,931 (R$15,535 at December 31, 2017). R$171,839, at December 31, 2018, (R$106,206, at December 31, 2017), relating to “Soluciona TI”, which consists of lease of IT equipment to small and medium companies and receipt of fixed installments over the contractual term. Considering the contractual terms, this product was classified as a finance lease. At December 31, 2018, the impact of the present value adjustment was R$41,455 (R$33,614 at December 31, 2017). The accounts receivable balances related to the "Soluciona IT" product include the following effects: Nominal amount receivable 573,094 434,743 Deferred financial income (53,424) (33,614) Present value of accounts receivable 519,670 401,129 Estimated impairment losses (196,435) (154,666) Net amount receivable 323,235 246,463 Current 151,396 140,257 Non-current 171,839 106,206 At December 31, 2018, the aging list of gross trade accounts receivable relating to the “Soluciona TI” product was as follows: Present value of accounts Nominal amount receivable receivable Falling due within one year 279,563 267,595 Falling due between one year and five years 293,531 252,075 Total 573,094 519,670 There are no unsecured residual values resulting in benefits to the lessor nor contingent payments recognized as revenue for the year. The following is the amounts receivable, net of estimated losses for impairment of accounts receivable, by maturity: Falling due 6,485,154 6,635,125 Overdue – 1 to 30 days 1,096,639 1,132,008 Overdue – 31 to 60 days 305,019 375,176 Overdue – 61 to 90 days 200,401 232,648 Overdue – 91 to 120 days 220,221 105,342 Overdue – over 120 days 423,200 382,055 Total 8,730,634 8,862,354 At December 31, 2018 and 2017, no customer represented more than 10% of trade accounts receivable, net. d) Changes in losses for impairment The following table shows the changes in estimated losses for impairment of accounts receivable. Balance at 12/31/16 (1,399,895) Supplement to estimated losses, net of resersal (Note 25) (1,481,015) Write-off due to use 1,456,158 Business combinations (Note 1.c.2) (8,719) Balance at 12/31/17 (1,433,471) Initial adoption IFRS 9 on 01.01.18 (364,456) Supplement to estimated losses, net of resersal (Note 25) (1,533,660) Write-off due to use 1,833,453 Balance at 12/31/18 (1,498,134) |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 31, 2018 | |
INVENTORIES | |
INVENTORIES | 5 ) INVENTORIES a) Accounting policy These are evaluated and presented at the lower of average acquisition cost and net realizable value, whichever is lower. These include resale materials such as cellphones, SIM cards, prepaid cards, accessories, consumption materials and maintenance. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. Estimated impairment losses are set up for materials and devices considered obsolete or whose carrying amounts are in excess of those usually sold by the Company within a reasonable period. Additions and reversals of estimated impairment losses and inventory obsolescence are included in cost of goods sold (Note 25). b) Breakdown Materials for resale 413,843 325,850 Materials for consumption 61,819 57,740 Other inventories 30,013 7,822 Gross total 505,675 391,412 Estimated losses from impairment or obsolescence (43,622) (42,657) Total 462,053 348,755 |
PREPAID EXPENSES
PREPAID EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
PREPAID EXPENSES | |
PREPAID EXPENSES | 6) PREPAID EXPENSES a) Accounting policy These are stated at amounts effectively disbursed referring to services contracted but not yet incurred. Prepaid expenses are allocated to the income statements to the extent that related services are rendered, and economic benefits are obtained. b) Breakdown Advertising and publicity 252,900 336,295 Insurance 24,867 36,941 Rental 32,792 29,713 Software and networks maintenance 17,485 12,375 Incremental costs - IFRS 15 (Note 2.f) 255,391 — Financial charges 43,853 2,592 Personal 33,970 28,178 Taxes and other 54,717 23,461 Total 715,975 469,555 Current 581,743 446,439 Non-current 134,232 23,116 |
INCOME AND SOCIAL CONTRIBUTION
INCOME AND SOCIAL CONTRIBUTION TAXES | 12 Months Ended |
Dec. 31, 2018 | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |
INCOME AND SOCIAL CONTRIBUTION TAXES | 7) INCOME AND SOCIAL CONTRIBUTION TAXES a) Accounting policy a.1) Current taxes Current tax assets and liabilities are measured at the estimated amount recoverable from, or payable to, the tax authorities. The tax rates and laws used in calculating the amounts referred to above are those in effect, or substantially in effect, at year-end. In the balance sheet, current taxes are presented net of prepayments over the year. Current income and social contribution taxes related to items directly recognized in equity are also recognized in equity. Management regularly assesses the tax position in circumstances in which tax regulation requires interpretation and sets up provision therefore when appropriate. a.2) Deferred taxes Deferred tax assets are recognized for all deductible temporary differences, unused tax credits and losses, to the extent that taxable profit is likely to be available for realization of deductible temporary differences and unused tax credits and losses are likely to be used, except: (i) when the deferred tax asset related to the deductible temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination and does not impact, at the transaction date, the book profit, income or loss for tax purposes; and (ii) on deductible temporary differences related to investments in subsidiaries, where deferred tax assets are recognized only to the extent that it is probable that temporary differences will be reversed in the near future and taxable profit is likely be available so that temporary differences can be used. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit shall be available to allow all or part of the deferred tax asset to be used. Derecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax liabilities are recognized on all temporary tax differences, except: (i) when the deferred tax liability arises from initial recognition of goodwill, or an asset or liability in a transaction other than a business combination, and does not affect book profit or taxable profit or tax losses on the transaction date; and (ii) on temporary tax differences related to investments in subsidiaries, in which the temporary difference reversal period can be controlled and temporary differences are not likely to be reversed in the near future. Deferred tax assets and liabilities are measured at the tax rate expected to be applicable for the year the asset will be realized, or the liability will be settled, based on the rates provided in tax legislation and that were published as at year-end. Deferred tax assets and liabilities are not discounted to present value and are classified in the balance sheet as non-current, irrespective of their expected realization. The tax effects of items recorded directly in equity are also recognized in equity. Deferred tax items are recognized based on the transaction which gave rise to that deferred tax, in comprehensive income or directly in equity. Deferred tax assets and liabilities are presented net when there is a legal or constructive right to offset a tax asset against a tax liability and deferred taxes relate to the same taxpaying entity and are subject to the same tax authority. b) Critical estimates and judgments There are uncertainties regarding the interpretation of complex tax regulations and the amount and timing of future taxable profits. The Company and its subsidiaries set up provision, based on estimates, for the possible consequences of audits by tax authorities in the respective jurisdictions in which they operate. The amount of this provision is based on various factors, such as previous tax audit experience and different interpretations of tax regulations by the taxable entity and by the relevant tax authority. Such differences in interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the Company or those of its subsidiaries. The Company and its subsidiaries evaluate the recoverability of deferred tax assets based on estimates of future profits. This recoverability ultimately depends on the ability to generate taxable profits over the period in which the deferred tax asset is deductible. The analysis considers the reversal period of deferred tax liabilities, as well as estimates of taxable profits, based on updated internal projections reflecting the latest trends. Determining the proper classification of the tax items depends on several factors, including an estimate of the period and the realization of the deferred tax asset and the expected date of payments of these taxes. The actual flow of receipt and payment of income tax could differ from estimates made by the Company and its subsidiaries, as a result of changes in tax laws or of unexpected future transactions that may have an impact on tax balances. c) Income and social contribution taxes recoverable Income taxes recoverable 245,883 428,524 Social contribution taxes recoverable 28,706 77,011 Total 274,589 505,535 d) Income and social contribution taxes payable Income taxes payable 8,756 3,267 Social contribution taxes payable 3,253 1,212 Total 12,009 4,479 e) Deferred taxes Significant components of deferred income and social contribution taxes are as follows: Effects of the initial Business adoption of Balances at Income Comprehensive combination Balances at Income Comprehensive IFRS 9 and Balances at 12/31/16 statement income (Note 1 c.2) Other 12/31/17 statement income IFRS 15 12/31/18 Deferred tax assets (liabilities) Income and social contribution taxes on tax losses (1) 14,071 710,411 — 69,451 — 793,933 634,543 — — 1,428,476 Income and social contribution taxes on temporary differences (2) 13,426 (1,251,816) 58,192 48,434 (86) (1,131,850) (2,151,290) 31,797 70,012 (3,181,331) Provisions for legal, labor, tax civil and regulatory contingencies 2,230,336 68,399 — — — 2,298,735 (333,035) — — 1,965,700 Trade accounts payable and other provisions 677,123 (25,706) — — — 651,417 (79,683) — — 571,734 Estimated losses on impairment of accounts receivable 358,805 76,155 — — — 434,960 (115,661) — 122,977 442,276 Customer portfolio and trademarks 313,092 (58,674) — — — 254,418 (69,815) — — 184,603 Estimated losses from modems and other P&E items 284,677 (83,736) — — — 200,941 (24,811) — — 176,130 Pension plans and other post-employment benefits 108,419 8,630 57,485 — — 174,534 20,934 30,753 — 226,221 Profit sharing 125,256 (15,210) — — — 110,046 19,643 — — 129,689 Provision for loyalty program 19,112 (1,991) — — — 17,121 1,031 — — 18,152 Accelerated accounting depreciation 24,033 (15,773) — — — 8,260 (7,873) — — 387 Estimated impairment losses on inventories 12,099 (347) — — — 11,752 (2,481) — — 9,271 Derivative transactions 60,133 (35,084) 822 — — 25,871 78,028 832 — 104,731 Licenses (1,420,556) (216,330) — — — (1,636,886) (216,328) — — (1,853,214) Goodwill (Spanish and Navytree, Vivo Part. and GVTPart.) (2,729,203) (868,969) — — — (3,598,172) (1,002,768) — — (4,600,940) Property, plant and equipment of small value — — — — — — (395,606) — — (395,606) Technological Innovation Law (140,940) 43,407 — — — (97,533) 47,406 — — (50,127) Other temporary differences (3) 91,040 (126,587) (115) 48,434 (86) 12,686 (70,271) 212 (52,965) (110,338) Total deferred tax assets (liabilities), noncurrent 27,497 (541,405) 58,192 117,885 (86) (337,917) (1,516,747) 31,797 70,012 (1,752,855) Deferred tax assets 4,541,952 5,288,176 5,569,885 Deferred tax liabilities (4,514,455) (5,626,093) (7,322,740) Deferred tax assets (liabilities), net 27,497 (337,917) (1,752,855) Represented in the balance sheet as follows: Deferred tax assets 27,497 371,408 230,097 Deferred tax liabilities — (709,325) (1,982,952) (1) This refers to the amounts recorded which, in accordance with Brazilian tax legislation, may be offset to the limit of 30% of the tax bases computed for the following years, with no expiry date. (2) This refers to amounts that will be realized upon payment of provision, occurrence of impairment losses for trade accounts receivable, or realization of inventories, as well as upon reversal of other provision. (3) These refer to deferred taxes arising from other temporary differences, such as deferred income, renewal of licenses, and subsidy on the sale of mobile phones, among others. At December 31, 2018, deferred tax credits (income and social contribution tax losses) were not recognized in subsidiaries' (Innoweb and TGLog) accounting records, in the amount of R$12,649 (R$11,938 at December 31, 2017), as it is not probable that future taxable profits will be available for these subsidiaries to benefit from such tax credits. Expected realization of deferred taxes, net, non-current. The amounts are based on projections subject to change in the future. Year 2019 2,082,829 2020 555,161 2021 494,257 2022 1,002,778 2023 259,562 2024 onwards (6,147,442) Total (1,752,855) f) Reconciliation of income tax and social contribution expense The Company and its subsidiaries recognize income and social contribution taxes on a monthly basis, on an accrual basis, and pay the taxes based on estimates, in accordance with the trial balances for tax-reduction/tax-suspension purposes. Taxes calculated on profits until the month of the financial statements are recorded in liabilities or assets, as applicable. Reconciliation of the reported tax expense and the amounts calculated by applying the statutory tax rate of 34% (income tax of 25% and social contribution tax of 9%) is shown in the table below for the year ended December 31, 2018, 2017 and 2016. Income before taxes 11,277,490 5,730,773 5,134,722 Income and social contribution tax expenses, at the tax rate of 34% (3,834,347) (1,948,463) (1,745,805) Permanent differences Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 11) (1,988) 537 423 Unclaimed interest on equity (14,426) (21,843) (11,432) Temporary differences in subsidiaries — 2,007 — Non-deductible expenses, gifts, incentives (76,671) (94,413) (88,916) Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years — 132,080 — Tax benefit related to interest on equity allocated 1,547,000 821,657 738,529 Other (additions) exclusions 31,200 (13,545) 57,721 Tax debits (2,349,232) (1,121,983) (1,049,480) Effective rate 20.8 % 19.6 % 20.4 % Current income and social contribution taxes (832,485) (580,578) (288,063) Deferred income and social contribution taxes (1,516,747) (541,405) (761,417) |
TAXES, CHARGES AND CONTRIBUTION
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | 12 Months Ended |
Dec. 31, 2018 | |
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | |
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | 8 ) TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE State VAT (ICMS) (1) 2,549,006 2,450,856 Withholding taxes and contributions (2) 129,741 238,355 PIS and COFINS (3) 5,000,677 85,098 Fistel, INSS, ISS and other taxes 217,056 27,431 Total 7,896,480 2,801,740 Current 4,674,218 2,058,455 Non-current 3,222,262 743,285 (1) This includes credits of ICMS arising from the acquisition of property and equipment, subject to offsetting in 48 months; requests for refund of ICMS, which was paid under invoices that were cancelled subsequently; for the rendering of services; tax substitution; and tax rate difference; among others. Non-current consolidated amounts include credits arising from the acquisition of property and equipment of R$509,920 and R$423,588 on December 31, 2018 and 2017, respectively. (2) This refers to credits on withholding income tax (“IRRF”) on short-term investments, interest on equity and others, which are used as deduction in operations for the period and social contribution tax withheld at source on services provided to public agencies. (3) The balance of December 31, 2018 include the tax credits of PIS and COFINS monetarily restated by SELIC, in the amounts of R$4,915,239, arising from the final judicial processes on May 17, 2018 and August 28, 2018, in favor of the Company and its subsidiary, which recognized the right to deduct ICMS from the basis of calculation of PIS and COFINS contributions for the periods from September 2003 to June 2017 and July 2004 to July 2013, respectively (see Notes 26 and 27). As at December 31, 2018, current and non-current balances were R$2,520,990 and R$2,394,249, respectively. The Internal Revenue Service filed a review, pursuant to Law 13,670/18, with the purpose of approving the PIS and COFINS credits resulting from the dispute that dealt with the exclusion of ICMS from the bases of these contributions. The Company has made every effort, including judicial measures, to meet in a timely manner the requests of this audit procedure and thus continue compensating its referred tax credits. The Company has three other lawsuits of the same nature in progress (including lawsuits of companies that have already been merged - GVT and Telemig), which are considered as contingent assets, which cover several periods between December 2001 and June 2017, whose ranges of values we estimate between R$1,700 million to R$2,200 million. (1) |
JUDICIAL DEPOSITS AND GARNISHME
JUDICIAL DEPOSITS AND GARNISHMENTS | 12 Months Ended |
Dec. 31, 2018 | |
JUDICIAL DEPOSITS AND GARNISHMENTS | |
JUDICIAL DEPOSITS AND GARNISHMENTS | 9 ) JUDICIAL DEPOSITS AND GARNISHMENTS In some situations, in connection with a legal requirement or to suspension of tax liability, judicial deposits are made to secure the continuance of the claims under discussion. Judicial deposits are recorded at historical cost and updated according to prevailing legislation. Judicial deposits Tax 1,929,594 4,230,917 Labor 522,201 885,338 Civil 1,164,835 1,205,807 Regulatory 208,447 200,627 Total 3,825,077 6,522,689 Garnishments 84,937 141,116 Total 3,910,014 6,663,805 Current 313,007 324,638 Non-current 3,597,007 6,339,167 The table below presents the composition of the balances as at December 31, 2018 and December 31, 2107 of the tax judicial deposits (segregated and summarized by tribute). 12.31.18 12.31.17 Contribution to Empresa Brasil de Comunicação (EBC) — 1,238,068 Telecommunications Inspection Fund (FISTEL) 44,771 1,161,061 Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL) 551,937 518,474 Universal Telecommunication Services Fund (FUST) 503,246 484,649 Social Contribution Tax for Intervention in the Economic Order (CIDE) 278,685 270,612 State Value-Added Tax (ICMS) 239,220 273,264 Social Security, work accident insurance (SAT) and funds to third parties (INSS) 141,759 134,688 Withholding Income Tax (IRRF) 55,425 45,846 Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS) 39,672 37,965 Other taxes, charges and contributions 74,879 66,290 Total 1,929,594 4,230,917 A brief description of the main tax-related judicial deposits is as follows: Contribution to Empresa Brasil de Comunicação (“EBC”) On behalf of its members, Sinditelebrasil (Union of Telephony, and Mobile and Personal Services) is challenging in court payment of the Contribution to Foster Public Radio Broadcasting to EBC, introduced by Law No. 11.652/2008. The Company and TData, as union members, made court deposits relating to that contribution. In the third quarter of 2018, the Company and TData had their accepted requests for conversion into income of the amounts deposited in court in the amount of R$1,378,170 to benefit EBC, with the maintenance of the discussion in progress. As a result, the Company and TData made the write-off of judicial deposits against the provisioned amounts (Note 19). Telecommunications Inspection Fund (“FISTEL”) The Company has legal proceedings involving the collection by ANATEL of the Installation Inspection Fee ("TFI") on the renewal of the licenses. In the second quarter of 2018, the judicial discussion regarding the exclusion of the calculation basis of the ("TFI") and Inspection and Operation Fee ("TFF") of mobile (cellular) stations that are not owned by the Company was unfavorable to the Company after it withdrew its appeal. Consequently, the amount of R$1,126,810 deposited judicially was handed over to ANATEL (Note 19). |
OTHER ASSETS
OTHER ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
OTHER ASSETS | |
OTHER ASSETS | 10) OTHER ASSETS Advances to employees and suppliers 83,094 58,456 Related-party receivables (Note 28) 120,776 166,733 Receivables from suppliers 114,175 114,015 Surplus from post-employment benefit plans (Note 30) 10,997 9,833 Other amounts receivable 20,670 61,295 Total 349,712 410,332 Current 302,607 321,397 Non-current 47,105 88,935 |
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2018 | |
INVESTMENTS | |
INVESTMENTS | 11) INVESTMENTS a) Accounting policy The consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company ceases to exercise said control. Assets, liabilities and results of a subsidiary acquired or sold during the year are included in the consolidated financial statements from the date on which the Company obtains control until the date on which the Company ceases to exercise control over the subsidiary. Joint control is the contractually agreed sharing of a control, only existing when decisions about relevant activities call for unanimous agreement by the parties sharing control. Control is obtained when the Company is exposed or has the right to variable returns based on its involvement with the investee and has the capacity of affecting those returns through the power exercised over an investee. Based on the equity method, investments are recorded in balance sheets at cost plus changes after the acquisition of the equity interest. The income statement reflects the portion of the results of operations of the investees. When changes are directly recognized in the investees' equity, the Company will recognize its portion in variations occurred, and record these variations in the statements of changes in equity and in the statements of comprehensive income, where applicable. The financial statements of investees are prepared for the same reporting period of the Company. Whenever necessary, adjustments are made so that the accounting policies are in accordance with those adopted by the Company. After the equity method is applied, the Company determines whether there is any need to recognize additional impairment of its investment in investees. At each closing date, the Company determines whether there is objective evidence of impairment of investment in the affiliate. If so, the Company calculates the recoverable amount as the difference between the recoverable value of the investees and their carrying amount and recognizes the amount in the income statements. When there is loss of significant influence over the investees, the Company evaluates and recognizes the investment, at that moment, at fair value. Any difference between the investees’ carrying amount by the time it loses significant influence and the fair value of the remaining investment and revenue from sale is recognized in the income statements. Foreign exchange variations in Aliança’s equity (jointly-controlled entity) are recognized in the Company’s equity in other comprehensive income (“Effects on conversion of investments abroad”, Note 23). b) Information on investees The following is a summary of the relevant financial data of the investees in which the Company holds a stake and contemplates the corporate changes described in Note 1 c). Joint Ventures (Aliança / AIX / ACT) 12/31/18 12/31/17 Equity interest 50.00 % 50.00 % Summary of balance sheets: Current assets 213,481 189,988 Non-current assets 12,327 13,410 Total assets 225,808 203,398 Current liabilities 7,103 4,143 Non-current liabilities 16,101 4,811 Equity 202,604 194,444 Total liabilities and equity 225,808 203,398 Investment Book value 101,302 97,222 Joint Ventures (Aliança / AIX / ACT) Summary of Income Statements: Aliança / AIX / ACT Aliança / AIX / ACT Aliança / AIX / ACT Net operating income 45,608 45,704 42,919 Operating costs and expenses (58,773) (43,571) (41,987) Financial income (expenses), net 1,334 1,713 2,021 Income and social contribution taxes 137 (686) (465) Net income (loss) for the year (11,694) 3,160 2,488 Equity pickup, according to interest held (5,847) 1,580 1,244 c) Changes in investments Other Total Joint ventures investments (1) investments Balances at 12/31/16 84,403 1,342 85,745 Equity pick-up 1,580 — 1,580 Other comprehensive income 11,239 338 11,577 Balances at 12/31/17 97,222 1,680 98,902 Equity pick-up (5,847) — (5,847) Provision for losses on investments — (700) (700) Other comprehensive income 9,927 (625) 9,302 Balances at 12/31/18 101,302 355 101,657 (1) |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | 12) PROPERTY, PLANT AND EQUIPMENT a) Accounting policy It is stated at acquisition and/or construction cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the borrowing costs for long-term construction projects if the recognition criteria are met and is stated net of ICMS (State VAT) credits, which were recorded as recoverable taxes. Asset costs are capitalized until the asset becomes operational. Costs incurred after the asset becomes operational and that do not improve the functionality or extend the useful life of the asset are immediately recognized on an accrual basis. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation. Likewise, expenses that represent asset improvement (expanded installed capacity or useful life) are capitalized. All the other repair and maintenance costs are recognized in the income statement as incurred. The present value of the expected cost for the decommissioning of property, plant and equipment items (towers and equipment on leased property) is capitalized at the cost of the respective asset matched against the provision for dismantling obligations (Note 19) and depreciated over the useful lives of the related assets, which do not exceed the lease term. Depreciation is calculated by the straight-line method over the useful lives of assets at rates that take into account the estimated useful lives of assets based on technical analyses. The assets’ residual values, useful lives and methods of depreciation are reviewed on a yearly basis, adjusted prospectively, if appropriate. Useful lives in terms of depreciation rates are reviewed annually by the Company. Property, plant and equipment items are written off when sold or when no future economic benefit is expected from their use or sale. Any gains or losses arising from write-off of assets (measured as the difference between the net disposal proceeds and the net carrying amount of the asset) are recognized in the income statement in the year in which the asset is written off. b) Critical estimates and judgments The accounting treatment of investment in fixed assets includes estimating the useful life period for depreciation purposes and the fair value at the date of acquisition, particularly for assets acquired in business combinations. Useful life determination requires estimates regarding the expected technological developments and alternative uses of assets. The hypotheses related to the technological aspect and its future development imply a significant level of analysis, considering the difficulties in forecasting the time and nature of future technological changes. An impairment loss exists when the carrying amount of an asset or cash-generating unit (“CGU”) exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use. The calculation of fair value less costs to sell is based on available information from sales transactions of similar assets or market prices less additional costs to dispose of the asset. The calculation of the value in use is based on the discounted cash flow model. The recoverable amount is sensitive to the discount rate used in the discounted cash flow method, as well as the expected future cash receipts and the growth rate used for extrapolation purposes. The Company periodically reviews the performance of the defined CGU in order to identify a possible devaluation. The determination of the recoverable value of the CGU also includes the use of assumptions and estimates and requires a significant degree of judgment and criterion. c) Breakdown, changes and depreciation rates We present a brief description of the main items that make up fixed assets, their movements and annual depreciation rates. Switching and transmission media equipment: Includes switching and control centers, gateway, platforms, base radio station, microcells, minicells, repeaters, antennas, radios, access networks, concentrators, cables, TV equipment and other switching and transmission media equipment. Terminal/modem equipment: Includes cellphones and modems (rent and free lease), CPCT, public telephones and other terminal equipment. Infrastructure: This includes buildings, elevators, central air conditioning equipment, towers, posts, containers, energy equipment, land piping, support and protectors, leasehold improvements, etc. Other fixed asset items: These include vehicles, repair and construction tools and instruments, telesupervision equipment, IT equipment, testing and measurement equipment, fixtures and other goods for general use. Assets and Switching and Terminal facilities transmission equipment / Estimated under equipment modems Infrastructure Land Other P&E losses (1) construction Total Annual depreciation rate(%) 2.50 to 25.00 6.67 to 66.67 2.50 to 66.67 10.00 to 25.00 Balances and changes: Balance at 12/31/16 22,231,874 2,588,307 3,725,207 315,719 819,356 (485,575) 2,730,030 31,924,918 Additions 42,999 141,132 91,160 550 259,620 (37,374) 6,085,487 6,583,574 Write-offs, net (88,766) (7,602) (6,966) (1,916) (2,522) 162,319 (18,897) 35,650 Net transfers 3,634,293 1,471,431 619,008 — 34,093 132,578 (5,910,612) (19,209) Depreciation (Note 25) (3,011,291) (1,468,936) (544,454) — (284,983) — — (5,309,664) Business Combination (Note 1.c.2) — — 1,342 — 4,888 — 817 7,047 Balance at 12/31/17 22,809,109 2,724,332 3,885,297 314,353 830,452 (228,052) 2,886,825 33,222,316 Additions 10,670 129,640 101,798 550 204,041 (8,975) 6,527,074 6,964,798 Write-offs, net (45,719) (1,721) (8,461) (71) (2,926) 80,135 (61,430) (40,193) Net transfers 5,380,744 1,098,380 449,369 — 124,772 — (7,239,573) (186,308) Depreciation (Note 25) (3,486,592) (1,379,547) (658,915) — (320,232) — — (5,845,286) Balance at 12/31/18 24,668,212 2,571,084 3,769,088 314,832 836,107 (156,892) 2,112,896 34,115,327 At 12.31.17 Cost 74,100,056 16,845,903 15,728,808 314,353 4,687,395 (228,052) 2,886,825 114,335,288 Accumulated depreciation (51,290,947) (14,121,571) (11,843,511) — (3,856,943) — — (81,112,972) Total 22,809,109 2,724,332 3,885,297 314,353 830,452 (228,052) 2,886,825 33,222,316 At 12.31.18 Cost 79,002,102 18,033,246 16,154,562 314,832 4,996,170 (156,892) 2,112,896 120,456,916 Accumulated depreciation (54,333,890) (15,462,162) (12,385,474) — (4,160,063) — — (86,341,589) Total 24,668,212 2,571,084 3,769,088 314,832 836,107 (156,892) 2,112,896 34,115,327 (1) d) Depreciation rates The Company performed valuations of useful lives applied to its property, plant and equipment using the direct comparative method of market data. The results of these evaluations indicated the need for changes in useful lives in 2018 or 2017. This change in the accounting estimate, which was applied, increased the depreciation expense for the year ended December 31, 2018 by R$267,657. e) Property and equipment items pledged in guarantee At December 31, 2018, the Company had consolidated amounts of property and equipment items pledged in guarantee for lawsuits, amounting to R$94,641 (R$176,591 at December 31, 2017). f) Reversible assets The STFC service concession arrangement establishes that all assets owned by the Company and that are indispensable to the provision of the services described in the referred to arrangement are considered “reversible” (returnable to the concession authority). At December 31, 2018, estimated residual value of reversible assets was R$8,621,863 (R$8,763,355 at December 31, 2017), which comprised switching and transmission equipment and public use terminals, external network equipment, energy, system and operational support equipment. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 13) INTANGIBLE ASSETS a) Accounting policy Intangible assets acquired separately are measured at cost upon their initial recognition. The cost of an intangible asset acquired in a business combination is its fair value at the acquisition date. After initial recognition, intangible assets are stated at acquisition and/or buildup cost, net of amortization and accumulated provision for impairment, where applicable. Intangible assets generated internally, excluding capitalized development costs, are not capitalized, and the expense is reflected in the income statement for the year in which it is incurred. The useful lives of intangible assets are considered finite or indefinite. Intangible assets with finite useful lives are amortized over their economic useful lives under the straight-line method and are tested for impairment whenever there is any indication of impairment loss. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed on an annual basis. Changes in the estimated useful life or the expected pattern of consumption of future economic benefits embodied in an asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the cost/expense category consistent with the function of the intangible assets. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the CGU level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be justifiable. Otherwise, changes in useful life – from indefinite to finite - are carried out prospectively. Goodwill generated upon investment acquisition is treated as an intangible assets with indefinite useful lifes. Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and recognized in the income statement on disposal. b) Critical estimates and judgments An impairment loss exists when the carrying amount of an asset or CGU exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use. The calculation of fair value less costs to sell is based on available information from sales transactions of similar assets or market prices less additional costs to dispose of the asset. The calculation of the value in use is based on the discounted cash flow model. The recoverable amount is sensitive to the discount rate used in the discounted cash flow method, as well as the expected future cash receipts and the growth rate used for extrapolation purposes. The Company periodically reviews the performance of the defined CGU in order to identify a possible devaluation in goodwill and other assets. The determination of the recoverable value of the CGU to which the goodwill is attributed also includes the use of assumptions and estimates and requires a significant degree of judgment and criterion. The accounting treatment of the investment in intangible assets includes making estimates to determine the useful life for amortization purposes and the fair value at the date of acquisition, particularly for assets acquired in business combinations. The determination of the useful lives requires estimates in relation to the expected technological evolution and the alternative use of the assets. Hypotheses related to the technological aspect and its future development imply a significant degree of analysis, since the timing and nature of future technological changes are difficult to predict. c) Breakdown, changes and amortization rates A brief description of the key intangible asset items with finite useful lives, is as follows: Software : This includes licenses for software used in the Company’s operating, commercial and administrative activities. Customer portfolio and trademarks : This includes intangible assets acquired through business combination. Licenses : These include concession and authorization licenses, acquired from ANATEL for provision of telecommunication services. These also include licenses from business combinations. Indefinite useful life Finite useful life Estimated Other losses Software Customer intangible for under Goodwill Software portfolio Trademarks Licenses assets software development Total Annual amortization rate (%) 20.00 to 50.00 11.76 to 12.85 5.13 to 66.67 3.60 to 6.67 6.67 to 20.00 Balances and changes: Balance at 12/31/16 23,062,421 2,694,521 2,561,220 1,157,820 14,897,968 50,702 (4,581) 63,425 44,483,496 Additions — 276,390 — — — 207 — 1,100,785 1,377,382 Write-offs, net — (7,427) — — — — 4,051 — (3,376) Net transfers — 701,545 — — — (24,297) 31 (658,070) 19,209 Amortization (Note 25) — (944,753) (582,357) (84,205) (928,362) (5,660) — — (2,545,337) Business Combination (Note 1.c.2) — 530 — — — — — — 530 Balance at 12/31/17 23,062,421 2,720,806 1,978,863 1,073,615 13,969,606 20,952 (499) 506,140 43,331,904 Additions — 970,172 — — 6,647 — — 249,307 1,226,126 Write-offs, net — (16) — — — — — — (16) Net transfers — 519,539 — — — 32,539 — (365,770) 186,308 Amortization (Note 25) — (965,459) (549,589) (84,205) (920,116) (3,968) — — (2,523,337) Balance at 12/31/18 23,062,421 3,245,042 1,429,274 989,410 13,056,137 49,523 (499) 389,677 42,220,985 At 12/31/17 Cost 23,062,421 15,125,532 4,513,278 1,658,897 20,237,572 238,201 (499) 506,140 65,341,542 Accumulated amortization — (12,404,726) (2,534,415) (585,282) (6,267,966) (217,249) — — (22,009,638) Total 23,062,421 2,720,806 1,978,863 1,073,615 13,969,606 20,952 (499) 506,140 43,331,904 At 12/31/18 Cost 23,062,421 16,604,769 4,513,278 1,658,897 20,244,219 270,741 (499) 389,677 66,743,503 Accumulated amortization — (13,359,727) (3,084,004) (669,487) (7,188,082) (221,218) — — (24,522,518) Total 23,062,421 3,245,042 1,429,274 989,410 13,056,137 49,523 (499) 389,677 42,220,985 d) Goodwill d.1) Accounting policy Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, recorded at fair value on the acquisition date, and the fair value of any non-controlling interest in the acquiree. For each business combination, the Company measures non-controlling interests in the acquiree either at its fair value or on the basis of its proportional share in the identifiable net assets of the acquiree. Costs directly attributable to an acquisition are recorded as expenses, as incurred. Upon acquiring a business, the Company assesses financial assets acquired and liabilities assumed so as to classify and allocate them in accordance with contractual terms, economic circumstances and relevant conditions on the acquisition date, including the segregation, by the acquiree, of embedded derivatives existing in host contracts in the acquiree. In the event a business combination is conducted in stages, the ownership interest previously held in the acquiree’s capital is reassessed at fair value on the date control is acquired, and any impacts are recognized in the income statement. Any contingent portion to be transferred by the acquirer shall be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent portion to be considered as an asset or liability is recognized in the income statement. Contingent consideration on acquisition of a business that is not classified as equity is subsequently measured at fair value through profit or loss, whether or not included in the scope of IFRS 9. Goodwill is initially measured as excess transferred payment amount in relation to acquired net assets (identifiable net assets acquired, and liabilities assumed). If consideration is lower than the fair value of acquired net assets, the difference must be recognized as a gain in the income statement. After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the CGUs that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a CGU and part of the operation within that CGU is disposed of, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is allocated based on the relative fair values of the disposed operation and the portion of the CGU retained. d.2) Goodwill breakdown The table below shows the composition of the goodwill recorded by the Company as of December 31, 2018. Ajato Telecomunicação Ltda. 149 Spanish and Figueira, by the merger of Telefônica Data Brasil Holding (TDBH) in 2006 212,058 Santo Genovese Participações, Atrium Telecomunicações, which took place in 2004 71,892 Telefônica Televisão Participações, former Navytree, occurred in 2008 780,693 Vivo Participações, occurred in 2011 9,160,488 GVT Participações, occurred in 2015 12,837,141 Total 23,062,421 |
IMPAIRMENT OF NONFINANCIAL ASSE
IMPAIRMENT OF NONFINANCIAL ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
IMPAIRMENT OF NONFINANCIAL ASSETS | |
IMPAIRMENT OF NONFINANCIAL ASSETS | 14) IMPAIRMENT OF NON-FINANCIAL ASSETS a) Accounting policy The Company annually reviews the net carrying amount of assets in order to evaluate events or changes in economic, operating or technological circumstances that may indicate impairment losses. When such evidence is found, and net carrying amount exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net carrying amount to the recoverable amount. The recoverable amount of an asset or a CGU is defined as the higher of value in use and net sales value. Upon estimation of the value in use of an asset or cash-generating unit, estimated future cash flows are discounted at present value using a discount rate Weighted Average Cost of Capital “WACC” which reflects the weighted rate between (i) the cost of capital (including specific risks) based on the Capital Asset Pricing Model; and (ii) the debt these components being applicable to the asset or CGU before taxes. Whenever possible, the net sale value is determined based on a firm sale agreement executed on an arm’s length basis between knowledgeable and willing parties, adjusted by expenses attributable to the sale of assets or, when there is no firm sale agreement, based on the market price of an active market, or on the latest transaction price involving similar assets. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine an asset’s or CGU recoverable amount since the last impairment loss was recognized. Any reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount or exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement. The following assets have specific characteristics for impairment testing: Goodwill: Goodwill is tested for impairment annually at the reporting date or earlier when circumstances indicate that the carrying amount may be impaired. Where the recoverable amount is lower than the carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets: Intangible assets with indefinite useful lives are tested for impairment annually at the reporting date either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying amount may be impaired. Determination of value in use: The key assumptions used to estimate value in use are: (i) revenues (projected considering the growth in customer base, growth in market revenue against GDP and the Company’s share of this market); (ii) variable costs and expenses (projected in accordance with the dynamics of the customer base, and fixed costs are projected in line with the historical performance of the Company, as well as with revenue growth); and (iii) capital investments (estimated considering the technological infrastructure necessary to enable the provision of services). Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by the Company’s management. b) Key assumptions used in the calculation of value in use: The value in use is mainly impacted by the following assumptions: Revenue growth: is based on the observation of the historical behavior of each revenue line, as well as trends based on market analysis. The projected revenue differs between product lines and services with a tendency of growth in broadband services, pay TV and IT compared to voice services (fixed). Growth in operating margin: takes into account the historical margin estimates of price correction, as well as ongoing projects with the aim of greater cost efficiency. Capex volume: the projects and future needs were considered, both in line with the evolution of expected revenues and always aiming at better efficiency in the use of these investments. The Capex volume may also be impacted by inflation and currency fluctuations. Discount rate: represents the assessment of risks in the current market. The calculation of the discount rate is based on the Company’s specific circumstances and being calculated based on the WACC. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by Company investors. The cost of debt is based on loans with interest income that the Company is obliged to honor. The specific risk segment is incorporated by applying individual notably Beta factors. c) Sensitivity to changes in assumptions: The Company carries out a sensitivity analysis of the impairment test by considering reasonable changes in the main assumptions used in such test. The following table shows the increases in/decreases in the percentage points (pp) which were assumed for the years ended December 31, 2018 and 2017: Changes in key assumptions In percentage points (p.p) Financial variables Discount rate +/- Perpetuity growth rates +/- Operating variables OIBDA Margin +/- Capex/Revenues Margin +/- The sensitivity analysis performed at year-end 2018 and 2017 indicates that there are no significant risks arising from possible changes in the financial and operating variables, considered individually. In other words, the Company considers that within the above limits, no losses would be recognized. d) Goodwill impairment testing The Company assessed recoverability of goodwill carrying amounts based on the value in use and discounted cash flow method. The process for determination of the value in use involves the use of assumptions, judgments and estimates on cash flows, such as revenue, cost and expense growth rates, estimated future investments and working capital and discount rates. The assumptions about cash flow increase projections were based on management’s estimates, market studies and macroeconomic projections. Future cash flows were discounted at the WACC rate. Consistent with the economic analysis techniques, the assessment of value in use is made for a period of five years, and thereafter, considering the perpetuity of the assumptions based on the capacity of business continuity for an indefinite time. Management considered that the period of five years is adequate, based on its past experience in preparing cash flow projections. The growth rate used to extrapolate projections beyond the five years period was 4.5% for both 2018 and 2017. Estimated future cash flows were discounted at the pre-tax rate of 13.99% and 13.58% in 2018 and 2017, respectively, also at nominal amounts. The inflation rate for the period analyzed in the projected cash flows was 4.0% for both 2018 and 2017. Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by the Company’s management. Based on annual impairment testing of the Company’s assets, prepared using projections considering the financial statements at December 31, 2018 and 2017, growth projections and operating results for the year ended December 31, 2018 and 2017, no impairment losses or evidence of losses were identified, since the value was in use is higher than the net carrying amount as at the assessment date. |
PERSONNEL, SOCIAL CHARGES AND B
PERSONNEL, SOCIAL CHARGES AND BENEFITS | 12 Months Ended |
Dec. 31, 2018 | |
PERSONNEL, SOCIAL CHARGES AND BENEFITS | |
PERSONNEL, SOCIAL CHARGES AND BENEFITS | 15) PERSONNEL, SOCIAL CHARGES AND BENEFITS Salaries and wages 34,767 40,171 Social charges and benefits 385,695 399,229 Profit sharing 265,433 273,384 Share-based payment plans (Note 29) 22,638 33,880 Other compensation 86,000 — Total 794,533 746,664 Current 782,630 723,380 Non-current 11,903 23,284 |
TRADE ACCOUNTS PAYABLE
TRADE ACCOUNTS PAYABLE | 12 Months Ended |
Dec. 31, 2018 | |
TRADE ACCOUNTS PAYABLE | |
TRADE ACCOUNTS PAYABLE | 16) TRADE ACCOUNTS PAYABLE a) Accounting policy These are obligations to pay for goods, services or goods that were acquired in the normal course of business. They are initially recognized at fair value and subsequently measured at amortized cost using the effective tax rate method, if applicable. b) Breakdown Sundry suppliers (Opex, Capex, Services and Material) 6,790,882 6,683,503 Amounts payable (operators, cobilling) 198,942 187,976 Interconnection / interlink (1) 269,446 224,777 Related parties (Note 28) 383,512 350,844 Total 7,642,782 7,447,100 |
TAXES, CHARGES AND CONTRIBUTI_2
TAXES, CHARGES AND CONTRIBUTIONS | 12 Months Ended |
Dec. 31, 2018 | |
TAXES, CHARGES AND CONTRIBUTIONS | |
TAXES, CHARGES AND CONTRIBUTIONS | 17) TAXES, CHARGES AND CONTRIBUTIONS ICMS 1,094,769 1,149,137 PIS and COFINS 512,714 419,589 Fust and Funttel 89,794 93,869 ISS, CIDE and other taxes 139,933 113,689 Total 1,837,210 1,776,284 Current 1,797,965 1,726,836 Non-current 39,245 49,448 |
DIVIDENDS AND INTEREST ON EQUIT
DIVIDENDS AND INTEREST ON EQUITY (IOE) | 12 Months Ended |
Dec. 31, 2018 | |
DIVIDENDS AND INTEREST ON EQUITY (IOE) | |
DIVIDENDS AND INTEREST ON EQUITY (IOE) | 18) DIVIDENDS AND INTEREST ON EQUITY a) Accounting policy a.1) Interest on equity Brazilian legislation allows companies to pay interest on equity, which is similar to payment of dividends; however, this is deductible for income tax calculation purposes. In order to comply with Brazilian tax legislation, the Company and its subsidiaries provision, in its accounting records, the amount due to match against the financial expenses account in the income statement for the year. For the presentation of these financial statements, that expense is reversed against a direct charge to equity, resulting in the same accounting treatment adopted for dividends. The distribution of interest on equity to shareholders is subject to withholding income tax at a 15% rate. a.2) Dividends Minimum mandatory dividends are stated in the balance sheet as legal obligations (provision in current liabilities). Dividends in excess of such minimum amount, not yet approved in the Shareholders’ Meeting, are recorded in equity as proposed additional dividends. After approval at the Shareholders’ Meeting, the dividends in excess of the mandatory minimum are transferred to current liabilities and classified as legal obligations. a.3) Unclaimed dividends and interest on equity Interest on equity and dividends not claimed by shareholders expire within three years from the initial payment date. Should dividends and interest on equity expire, these amounts are recorded in retained earnings for later distribution. b) Dividends and interest on equity payable b.1) Breakdown: Telefónica Latinoamérica Holding 952,217 505,750 Telefónica 1,146,619 609,003 SP Telecomunicações Participações 722,862 383,933 Telefónica Chile 2,015 1,070 Non-controlling interest 1,349,203 896,360 Total 4,172,916 2,396,116 b.2) Changes: Balance at 12/31/16 2,195,031 Supplementary dividends for 2016 1,913,987 Interim interest on equity (net of IRRF) 2,054,143 Unclaimed dividends and interest on equity (101,778) Payment of dividends and interest on equity (3,668,551) IRRF on shareholders exempt/immune from interest on equity 3,284 Balance at 12/31/17 2,396,116 Supplementary dividends for 2017 2,191,864 Interim interest on equity (net of IRRF) 3,867,500 Unclaimed dividends and interest on equity (152,770) Payment of dividends and interest on equity (4,136,878) IRRF on shareholders exempt/immune from interest on equity 7,084 Balance at 12/31/18 4,172,916 For the cash flow statement, interest on equity and dividends paid to shareholders are recognized in “Financing Activities”. |
PROVISIONS AND CONTINGENCIES
PROVISIONS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
PROVISIONS AND CONTINGENCIES | |
PROVISIONS AND CONTINGENCIES | 19) PROVISION AND CONTINGENCIES a) Accounting policy Provision is recognized when the Company has a present obligation (legal or constructive) as a result of a past event, when it is probable that economic benefits are required to settle the obligation and a reliable estimate of the value of the obligation can be made. Provision is restated at the balance sheet date considering the likely amount of loss and the nature of each contingency. Provision amounts for contingencies are presented at their gross amount, less the corresponding judicial deposits, and are classified as provision for civil, labor, tax and regulatory contingencies. Judicial deposits are classified as assets given that the conditions required for their net presentation with provision do not exist. Provision for civil, labor, tax and regulatory legal claims The Company and its subsidiaries are parties to administrative, labor, tax, civil and regulatory claims, and accounting provision amounts have been recorded in respect of claims whose likelihood of loss was classified as probable. The assessment of the likelihood of loss includes an analysis of available evidence, the hierarchy of laws, available case law, the latest court decisions law and their relevance in the legal system, as well as the opinion of outside legal counsel. Provision is reviewed and adjusted considering changes in existing circumstances, such as the applicable statute of limitations, tax audit conclusions, or additional exposures identified based on new matters or court decisions. Provision for decommissioning of assets This refers to costs to be incurred due to returning sites to owners (locations intended for tower and equipment installation on leased property) in the same condition as these were found at the time of execution of the initial lease agreement. These costs are provisioned at the present value of amounts expected to settle the obligation using estimated cash flows and are recognized as part of the cost of the corresponding asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to decommissioning of assets. The financial effect of the discount is recorded as incurred and recognized in the income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to, or deducted from, the cost of the asset. Contingent liabilities recognized in a business combination A contingent liability recognized in business combination is initially measured at fair value. This refers to contingent liabilities arising from Purchase Price Allocation generated on acquisition of the controlling interest of Vivo Part. in 2011 and GVTPart. in 2015. b) Critical estimates and judgments Provision is recognized when the Company has a present obligation arising from a past event, settlement of which requires an outflow of resources rated as probable and when it can be reliably estimated. This obligation can be legal or constructive, derived from, among other factors, regulations, contracts, customary practices or public commitments that expose third parties to a valid expectation that the Company or its subsidiaries will assume certain responsibilities. The determination of the provision is based on the best estimate of the disbursement required to settle the corresponding obligation, considering the information available as at the closing date, including the opinion of independent experts, such as legal advisors. c) Information on provisions and contingencies The Company and its subsidiaries are parties to administrative and judicial proceedings and labor, tax and civil claims filed in different courts. The management of the Company and its subsidiaries, based on the opinion of its legal counsel, recognized provision for proceedings for which an unfavorable outcome is considered probable. Breakdown of changes in provision for cases in which an unfavorable outcome is probable, in addition to contingent liabilities and provision for decommissioning are as follows: Provisions for contingencies Contingent Provision for Labor Tax Civil Regulatory liabilities (PPA) decommissioning Total Balances at 12/31/16 1,382,957 3,129,681 1,039,357 828,934 881,745 546,587 7,809,261 Additions (reversal), net (Note 26) 297,171 154,441 438,693 198,344 (89,230) — 999,419 Other additions (reversal) (2) (492) 93,596 207 — — 20,765 114,076 Write-offs due to payment (865,656) (168,407) (551,928) (6,873) — — (1,592,864) Write-offs due to taxes (1) — (66,027) — — — — (66,027) Monetary restatement 147,334 348,393 123,487 83,387 53,281 12,129 768,011 Business combination (Note 1 c.2) 19,282 87,531 6,061 — — — 112,874 Balances at 12/31/17 980,596 3,579,208 1,055,877 1,103,792 845,796 579,481 8,144,750 Additions (reversal), net (Note 26) 319,056 452,746 395,631 (41,837) (27,345) — 1,098,251 Other additions (reversal) (2) (99,372) (2,443,047) (14,119) — — 16,752 (2,539,786) Write-offs due to payment (541,749) (51,924) (598,294) (117,599) — — (1,309,566) Monetary restatement 121,155 414,914 165,708 77,860 8,824 77,215 865,676 Balances at 12/31/18 779,686 1,951,897 1,004,803 1,022,216 827,275 673,448 6,259,325 At 12/31/17 Current 239,229 — 201,673 994,009 — — 1,434,911 Non-current 741,367 3,579,208 854,204 109,783 845,796 579,481 6,709,839 At 12/31/18 Current 245,805 — 132,124 — — — 377,929 Non-current 533,881 1,951,897 872,679 1,022,216 827,275 673,448 5,881,396 (1) (2) c.1) Labor provision and contingencies Amounts involved Nature/Degree of Risk Provisions - probable losses 779,686 980,596 Possible losses 191,398 261,876 Labor provision and contingencies involve labor claims filed by former employees and outsourced employees (the latter alleging subsidiary or joint liability) claiming for, among other issues, overtime, salary equalization, post-retirement benefits, allowance for health hazard and risk premium, and matters relating to outsourcing. The Company finalized an improvement work in calculating the estimate of the labor provision value for cases of solidarity/subsidiarity with third parties, evolving from a calculation based on the historical average of payments to an assessment of the expected loss in an individualized way for each process, resulting in an increase in the provision of R$116 million. The Company is also a defendant in labor claims filed by retired former employees who are covered by the Retired Employees Medical Assistance Plan ("PAMA"), who, among other issues, are demanding the cancellation of amendments to this plan. Most of these claims await a decision by the Superior Labor Court. Based on the opinion of its legal counsel and recent decisions of the courts, management considers the risk of loss in these cases as possible. No amount has been specified for these claims, since is not possible to estimate the cost to the Company in the event of loss. In addition, the Company is a party to Public Civil Actions filed by the Labor Public Prosecutor's Office, whose objects relate essentially to instructing the Company to cease hiring an interposed company to carry out the Company's activities. In August 2018, most of the Federal Supreme Court ("STF") Ministers judged the legality of unrestricted outsourcing, including the end activity, safeguarding the subsidiary's responsibility of the service provider. However, it is expected that this decision will be published and possible foreclosure of a declaration to clarify the scope of the decision, including for cases that have already been settled when the application of that decision will be assessed in each case where the subject is discussed. In view of these considerations, there are still no conditions to estimate amounts or possible losses for the Company. c.2) Tax provision and contingencies Amounts involved Nature/Degree of Risk Provisions - probable losses 1,951,897 3,579,208 Federal 526,943 502,153 State 909,547 231,998 Municipal 33,607 32,054 FUST, FISTEL and EBC 481,800 2,813,003 Possible losses 36,103,128 35,388,910 Federal 12,025,529 8,226,374 State 16,294,685 18,968,349 Municipal 637,690 548,014 FUST, FUNTTEL and FISTEL 7,145,224 7,646,173 c.2.1) Probable tax contingencies Management and its legal counsel understand that losses are probable in the following federal, state, municipal and other tax proceedings (FUST and EBC) as described below: Federal taxes The Company and/or its subsidiaries are parties to administrative and legal proceedings relating to: (i) claims resulting from the non-ratification of compensation and refund requests formulated; (ii) CIDE levied on the remittance of amounts abroad related to technical and administrative assistance and similar services, as well as royalties; (iii) withholding income tax on interest on equity; (iv) Social Investment Fund (Finsocial) offset amounts; and (v) additional charges to the PIS and COFINS tax base, as well as additional charges to COFINS required by Law No. 9,718/98. State taxes The Company and/or its subsidiaries are parties to administrative and judicial proceedings relating to ICMS, regarding: (i) disallowance credits; (ii) non-taxation of telecommunications services; (iii) tax credit for challenges/disputes over telecommunication services not provided or wrongly charged (Agreement 39/01); (iv) aliquot differential; (v) leasing of infrastructure necessary for internet services (data); and (vi) outflows of goods with prices lower than those of acquisition. Municipal taxes The Company and/or its subsidiaries are parties to various municipal tax proceedings, at the judicial level, relating to: (i) Property tax (“IPTU”); (ii) Services tax (“ISS”) on equipment leasing services, non-core activities and supplementary activities; and (iii) withholding of ISS on contractors' services. FUST, FISTEL and EBC The Company and/or its subsidiaries have administrative and judicial discussions related to the non-inclusion of interconnection expenses and industrial exploitation of a dedicated line in the calculation basis of FUST. In the second quarter of 2018, the discussion regarding the exclusion of the calculation basis of the TFI and TFF of mobile (cellular) stations that are not owned by the Company was closed unfavorably to the Company and the amounts deposited judicially (Note 9) were handed over to ANATEL. In the third quarter of 2018, the Company and TData had their accepted requests for conversion into income of the amounts deposited in court, relating to EBC rates, with the maintenance of the discussion in progress. As a result, the Company and TData made the write-downs of the amounts provisioned against the amounts deposited in court (Note 9). c.2.2) Possible tax contingencies Management and its legal counsel understand that losses are possible in the following federal, state, municipal and other tax proceedings (FUST, FUNTTEL and FISTEL), described below: Federal taxes The Company and/or its subsidiaries are parties to various administrative and judicial proceedings, at the federal level, which are awaiting decisions in different court levels. The most important of these proceedings are: (i) statements of dissatisfaction resulting from failure to approve requests for compensation submitted by the Company; (ii) INSS (a) on compensation payment for salary losses arising from the "Plano Verão" and the "Plano Bresser"; (b) SAT, social security amounts owed to third parties (INCRA and SEBRAE); (c) supply of meals to employees, withholding of 11% (assignment of workforce); and (d) Stock Options - requirement of social security contributions on amounts paid to employees under the stock option plan; (iii) withholding income tax and CIDE on the funds remitted abroad related to technical services and to administrative support and similar services, etc., and royalties; (iv) income and social contribution taxes: (a) disallowance of costs and sundry expenses not evidenced; and (b) disallowance of expenses on goodwill of the corporate restructuring of Terra Networks and Vivo S.A., and for the takeovers of Navytree, TDBH, VivoPart. and GVTPart.; (v) deduction of COFINS on swap operation losses; (vi) PIS and COFINS: (a) accrual basis versus cash basis; (b) levied on value-added services; and (c) monthly subscription services; (vii) income tax-related incentive investments FINOR, FINAN or FUNRES; (viii) ex-tariff, cancellation of the benefits under CAMEX Resolution No. 6, increase in the import duty from 4% to 28%; (ix) IPI levied on shipment of fixed access units from the Company's establishment; (x) Financial transaction tax (IOF) - required on loan transactions, intercompany loans and credit transactions; and (xi) operating expenses allegedly non-deductible and related to estimated losses on the recoverable value of accounts receivable. State taxes The Company and/or its subsidiaries are parties to various administrative and judicial proceedings, at the state level, related to ICMS, which are awaiting decisions in different court levels: (i) rental of movable property; (ii) international calls; (iii) reversal credit related to the acquisition of items of property, plant and equipment and payment in interstate transfers of property, plant and equipment between branches; (iv) reversal of previously unused credits; (v) service provided outside São Paulo state paid to São Paulo state; (vi) co-billing; (vii) tax substitution with a fictitious tax base (tax guideline); (viii) use of credits related to acquisition of electric power; (ix) secondary activities, value added and supplementary services; (x) tax credits related to opposition/challenges regarding telecommunications services not provided or mistakenly charged (Agreement 39/01); (xi) deferred collection of interconnection (“DETRAF” - Traffic and Service Provision Document); (xii) credits derived from tax benefits granted by other states; (xiii) disallowance of tax incentives related to cultural projects; (xiv) transfers of assets among business units owned by the Company; (xv) communications service tax credits used in provision of services of the same nature; (xvi) card donation for prepaid service activation; (xvii) reversal of credit from return and free lease in connection with assignment of networks (used by the Company itself and exemption of public bodies); (xviii) DETRAF fine; (xix) own consumption; (xx) exemption of public bodies; (xxi) amounts given by way of discounts; (xxii) new tax register bookkeeping without prior authorization by tax authorities; (xxiii) advertising services; (xxiv) unmeasured services; and (xxv) monthly subscription, which is in the STF with declaration liens and the Company awaits the judgment of the STF on the request for modulation. Municipal taxes The Company and/or its subsidiaries are parties to various administrative and judicial proceedings, at the municipal level, which are awaiting decisions in different court levels. The most important of these proceedings are: (i) ISS on: (a) non-core activity, value-added and supplementary services; (b) withholding at source; (c) call identification and mobile phone licensing services; (d) full-time services, provision, returns and cancelled tax receipts; (e) data processing and antivirus congeners; (f) charge for use of mobile network and lease of infrastructure; (g) advertising services; (h) services provided by third parties; and (i) advisory services in corporate management provided by Telefónica Latino América Holding; (ii) IPTU; (iii) land use tax; and (iv) various municipal charges. FUST, FUNTTEL and FISTEL Universal Telecommunications Services Fund (“FUST”) Writs of mandamus were filed seeking the right to not include revenues with interconnection and Industrial Use of Dedicated Line (“EILD”) in the FUST tax base, according to Abridgment No. 7 of December 15, 2005, as it does not comply with the provisions contained in the sole paragraph of Article 6 of Law No. 9,998/00, which are awaiting a decision from Higher Courts. Various delinquency notices were issued by ANATEL at the administrative level to collect charges on interconnections, EILD and other revenues not earned from the provision of telecommunication services. At December 31, 2018, the consolidated amounts involved totaled R$3,701,208 (R$4,316,571 at December 31, 2017). Fund for Technological Development of Telecommunications (“FUNTTEL”) Proceedings filed for recognition of the right not to include interconnection revenues and any others arising from the use of resources that are part of the networks in the FUNTTEL calculation basis, as determined by Law 10,052/00 and Decree No. 3,737/01, thus avoiding the improper application of Article 4, paragraph 5, of Resolution 95/13. Several notifications of debits drawn up by the Ministry of Communications in administrative actions for constitution of the tax credit related to the interconnection, network resources and other revenues that do not originate from the provision of telecommunication services. At December 31, 2018, the consolidated amounts involved totaled R$618,473 (R$493,867 at December 31, 2017). Telecommunications Inspection Fund (“FISTEL”) Judicial actions for the collection of TFI on: (i) extensions of the term of validity of the licenses for use of telephone exchanges associated with the operation of the fixed switched telephone service; and (ii) extensions of the period of validity of the right to use radiofrequency associated with the operation of the telephone service personal mobile service. At December 31, 2018, the consolidated amounts involved totaled R$2,825,543 (R$2,835,735 at December 31, 2017). c.3) Civil provision civil contingencies Amounts involved Nature/Degree of Risk Provisions - probable losses 1,004,803 1,055,877 Possible losses 3,493,655 2,858,796 c.3.1) Provision for probable civil losses Management and its legal counsel understand that losses are probable in the following civil proceedings: The Company and/or its subsidiaries are parties to proceedings involving rights to the supplementary amounts from shares calculated on network expansion plans since 1996 (supplement of share proceedings). These proceedings are at different stages: lower courts, court of justice and high court of justice. At December 31, 2018, consolidated provision totaled R$334,877 (R$324,232 at December 31, 2017). The Company and/or its subsidiaries are parties to various civil proceedings related to consumers at the administrative and judicial level, relating to the non-provision of services and/or products sold. At December 31, 2018, consolidated provision totaled R$353,850 (R$296,169 at December 31, 2017). The Company and/or its subsidiaries are parties to various civil proceedings of a non-consumer nature at administrative and judicial levels, all arising in the ordinary course of business. At December 31, 2018, consolidated provision totaled R$316,076 (R$435,476 at December 31, 2017). c.3.2) Civil contingencies assessed as possible losses Management and its legal counsel understand that losses are possible in the following civil proceedings: Collective Action filed by SISTEL Participants' Association (“ASTEL”) in the state of São Paulo, in which SISTEL associates in the state of São Paulo challenge the changes made in the PAMA and claim for the reestablishment of the prior "status quo". This proceeding is still in the appeal phase and awaits a decision on the Interlocutory Appeal filed by the Company against the decision on possible admission of the appeal to higher and supreme courts filed in connection with the Court of Appeals' decision, which changed the decision rendering the matter groundless. The amount cannot be estimated, and the claims cannot be settled due to their unenforceability because it entails the return to the prior plan conditions. Civil Class Actions filed by ASTEL, in the state of São Paulo, and by the Brazilian National Federation of Associations of Retirees, Pensioners and Pension Fund Members of the Telecommunications Industry “(FENAPAS”), both against SISTEL, the Company and other carriers, in order to annul the spin-off of the PBS private pension plan, alleging, in short, the "windup of the supplementary private pension plan of the SISTEL Foundation", which led to various specific mirror PBS plans, and corresponding allocation of funds from technical surplus and tax contingencies existing at the time of the spin-off. The amount cannot be estimated, and the claims cannot be settled due to their unenforceability because this involves the return of the spun-off assets of SISTEL relating to telecommunication carriers of the former Telebrás System. The Company is party to other civil claims, at several levels, related to service rendering rights. Such claims have been filed by individual consumers, civil associations representing consumer rights or by the Bureau of Consumer Protection (“PROCON”), as well as by the Federal and State Public Prosecutor's Office. The Company is also party to other claims of several types related to the ordinary course of business. At December 31, 2018, the consolidated amount totaled R$3,466,522 (R$2,827,071 at December 31, 2017). Terra Networks is a party to: (i) supplier action related to the transmission of events; (ii) PROCON fine (annulment action); (iii) indemnification action related to the use of content; (iv) ECAD action on copyright collection; and (v) claim actions filed by former subscribers regarding unrecognized collection, collection of undue value and contractual non-compliance. At December 31, 2018, the amount was R$12,926 (R$17,518 at December 31, 2017). The Company has received notices regarding non-compliance with the Customer Service (“SAC”) Decree. The Company is currently party to various lawsuits (administrative and legal proceedings). At December 31, 2018 and 2017, the amount was R$14,207. Intelectual Property: Lune Projetos Especiais Telecomunicação Comércio e Ind. Ltda. (“Lune”), a Brazilian company, filed an action on November 20, 2001 against 23 wireless carriers claiming to own the patent for caller ID and the trademark "Bina". The purpose of that lawsuit was to interrupt provision of such service by carriers and to seek indemnification equivalent to the amount paid by consumers for using the service. An unfavorable decision was handed down determining that the Company should refrained from selling mobile phones with caller ID service ("Bina"), subject to a daily fine of R$10,000.00 (ten thousand reais) in the case of non-compliance. Furthermore, according to that decision, the Company must pay indemnification for royalties, to be calculated on settlement. Motions for Clarification were proposed by all parties and Lune's motions for clarification were accepted since an injunctive relief in this stage of the proceedings was deemed applicable. A bill of review appeal was filed in view of the current decision which granted a stay of execution suspending that unfavorable decision until final judgment of the review. A bill of review was filed in view of the sentence handed down on June 30, 2016, by the 4th Chamber of the Court of Justice of the Federal District, in order to annul the lower court sentence and remit the proceedings back to the lower court for a new examination. The Company brought a Special Appeal against the aforementioned judgment in order to recognize the active illegitimacy of Lune and determined the termination of the proceedings, and such appeal is awaiting judgment before the Superior Court of Justice ("STJ"). There is no way to determine at this time the extent of potential liabilities with respect to this claim. The Company and other wireless carriers figure as defendants in several lawsuits filed by the Public Prosecutor's Office and consumer associations to challenge imposition of a period to use prepaid minutes. The plaintiffs allege that the prepaid minutes should not expire after a specific period. Conflicting decisions were handed down by courts on the matter, even though the Company understands that its criteria for the period determination comply with ANATEL standards. c.4) Regulatory provision and contingencies Amounts involved Nature/Degree of Risk Provisions - probable losses 1,022,216 1,103,792 Possible losses 6,119,136 5,065,907 c.4.1) Provision for regulatory proceedings assessed as probable losses According to the Company's management and legal counsel, the likelihood of loss of the following regulatory proceedings is probable: The Company is party to administrative proceedings against ANATEL, filed based on an alleged failure to meet sector regulations, and to judicial proceedings to contest sanctions applied by ANATEL at the administrative level. c.4.2) Regulatory contingencies assessed as possible losses According to the Company's management and legal counsel, the likelihood of loss of the following regulatory proceedings is possible: The Company is party to administrative proceedings filed by ANATEL alleging non-compliance with the obligations set forth in industry regulations, as well as legal claims which discuss the sanctions applied by ANATEL at the administrative level. At December 31, 2018, the consolidated amount was R$6,119,136 (R$5,065,907 at December 31, 2017). Administrative and judicial proceedings discussing payment of a 2% charge on interconnection services revenue arising from the extension of right of use of SMP related radio frequencies. Under clause 1.7 of the authorization term that grants right of use of SMP related radio frequencies, the extension of right of use of such frequencies entails payment every two years, during the extension period (15 years) of a 2% charge calculated on net revenues from the service provider's Basic and Alternative Plans of the service company, determined in the year before that of payment. However, ANATEL determined that in addition to revenues from Service Plans, the charge corresponding to 2% should also be levied on interconnection revenues and other operating revenues, which is not stipulated for in said clauses. Considering, based on the provisions of the Authorization Terms, that revenue from interconnection services should not be included in the calculation of the 2% charge for radiofrequency use right extension, the Company filed administrative and legal proceedings challenging these charges, based on ANATEL's position. In 2018, as a result of the end of negotiations of the Company's Term of Conduct Adjustment ("TAC") (which was not concluded), ANATEL established a collection of new administrative procedures related to inspections on pipelines that would be contemplated in the TAC. This collection of processes, given the environment and factual context of the subjects treated there, was evaluated as possible loss. In May 2018, the Company filed a lawsuit to annul ANATEL's final decision, in March of that year, in the records of the Procedure for Determining Non-Compliance of Obligations (“PADO”) for alleged violations of the fixed telephone regulation. This PADO has been suspended for years due to the negotiations of the TAC, between the Company and ANATEL. By closing the negotiations without agreement, this sanctioning administrative process was reactivated and finalized. In the decision of March 2018, ANATEL understood that the Company had committed several infractions, especially those related to the deadlines for communication of suspension of the service of the users in default and the deadlines for the restoration of the services after payment communication. The amount of the fine imposed by ANATEL and object of this lawsuit is approximately R$211 million, and plus interest and correction this reaches approximately R$482 million (at December 31, 2018). The Company understands that the fine imposed is unlawful and undue based on the following defense arguments: (i) ANATEL's mistake in determining the universe of users considered in the fine (number of affected users is lower than that considered by ANATEL) and; (ii) the calculation of a fine is disproportionate and unfounded. The fine was not paid. However, there is an insurance guarantee presented in full value judgment. The suit is in the first instance and is currently awaiting a date for conciliation hearing. d) Guarantees The Company and its subsidiaries granted guarantees for tax, civil and labor proceedings, as follows: 12.31.18 12.31.17 Judicial deposits Judicial deposits Property and and Letters of Property and and Letters of equipment garnishments guarantee equipment garnishments guarantee Civil, labor and tax 94,641 3,910,014 2,301,210 176,591 6,663,805 1,669,476 Total 94,641 3,910,014 2,301,210 176,591 6,663,805 1,669,476 At December 31, 2018, in addition to the guarantees presented above, the Company and its subsidiaries had amounts under short-term investment frozen by courts (except for loan-related investments) in the consolidated amount of R$64,461 (R$69,764 at December 31, 2017). |
LOANS, FINANCING AND DEBENTURES
LOANS, FINANCING AND DEBENTURES | 12 Months Ended |
Dec. 31, 2018 | |
LOANS, FINANCING AND DEBENTURES | |
LOANS, FINANCING AND DEBENTURES | 20) LOANS, FINANCING AND DEBENTURES a) Accounting policy These are financial liabilities measured initially and recognized at fair value, net of costs incurred to obtain them and subsequently measured at amortized cost (plus pro-rata charges and interest), considering the effective interest rate of each operation, or at fair value through profit or loss. They are classified as current unless the Company has the unconditional right to settle the liability for at least 12 months after the closing date of the year. Borrowing costs directly related to the acquisition, construction or production of an asset that necessarily requires more than 18 months to be completed for use or sale purposes are capitalized as part of the cost of the corresponding asset. The Company did not capitalize borrowing and financing costs and debentures due to the absence of qualifying assets. All other costs of loans, financing and debentures are recorded in expense in the period in which they are incurred. The costs of loans, financing and debentures comprise interest and other costs incurred. b) Breakdown Information as of December 31, 2018 12/31/18 12/31/17 Currency Annual interest rate Maturity Guarantees Current Non-current Total Current Non-current Total Local currency 1,367,551 4,675,271 6,042,822 2,891,142 5,345,445 8,236,587 Financial Institutions (b.1) 666,213 819,742 1,485,955 820,468 1,456,624 2,277,092 BNDES FINEM URTJLP TJLP+ 0 to 4.08% Jul-19 (1) 214,012 — 214,012 371,946 213,958 585,904 BNDES FINEM URTJLP TJLP+ 0 to 3.38% Aug-20 (3) 184,200 122,011 306,211 184,007 303,560 487,567 BNDES FINEM R$ Nov-19 (3) 13,403 — 13,403 14,654 13,377 28,031 BNDES FINEM URTJLP TJLP+ 0 to 3.12% Jan-23 (3) 103,486 316,269 419,755 101,879 413,552 515,431 BNDES FINEM R$ 4.00% to 6.00% Jan-23 (3) 37,837 94,516 132,353 37,061 132,092 169,153 BNDES FINEM R$ Selic Acum. D-2 + 2.32% Jan-23 (3) 80,014 245,887 325,901 70,426 305,952 376,378 BNDES PSI R$ 2.5% to 5.5% Jan-23 (2) 18,207 1,263 19,470 25,405 19,413 44,818 BNB R$ 7.06% to 10% Aug-22 (4) 15,054 39,796 54,850 15,090 54,720 69,810 Suppliers (b.2) R$ Dec-19 524,244 — 524,244 607,152 — 607,152 Debentures (b.3) 123,961 3,049,949 3,173,910 1,412,486 3,108,253 4,520,739 4th issue – Series 3 R$ IPCA+4.00% Oct-19 (5) 41,121 — 41,121 312 40,010 40,322 1st issue – Minas Comunica R$ IPCA+0.50% Jul-21 (5) 26,250 52,499 78,749 24,088 72,264 96,352 4th issue R$ 100% of CDI + 0.68% Apr-18 (5) — — — 1,317,513 — 1,317,513 5th issue R$ 108.25% of CDI Feb-22 (5) 51,233 1,997,694 2,048,927 64,397 1,996,517 2,060,914 6th issue R$ 100% of CDI + 0.24% Nov-20 (5) 5,357 999,756 1,005,113 6,176 999,462 1,005,638 Finance lease (b.4) R$ IPCA and IGP-M Aug-33 53,133 339,894 393,027 51,036 334,424 385,460 Contingent Consideration (b.5) R$ Selic — 465,686 465,686 — 446,144 446,144 Foreign Currency 96,615 — 96,615 142,299 82,955 225,254 Financial Institutions (b.1) 96,615 — 96,615 142,299 82,955 225,254 BNDES FINEM UMBND ECM + 2.38% Jul-19 (1) 96,615 — 96,615 142,299 82,955 225,254 Total 1,464,166 4,675,271 6,139,437 3,033,441 5,428,400 8,461,841 (1) Guarantee in receivables relating to 15% of the outstanding debt balance or four times the largest installment, whichever is higher. (2) Pledge of financed assets. (3) Assignment of receivables corresponding to 20% of outstanding debt balance or one time the last installment of sub-credit facility "A" (UMIPCA) plus five times the last installment of each of the other sub-credit facilities, whichever is greater. (4) Bank guarantee provided by Banco Safra in an amount equivalent to 100% of the outstanding financing debt balance. Setting up a liquidity fund represented by financial investments in the amount equivalent to three installments of repayment referenced to the average post-grace period performance. Balances were R$12,473 and R$11,722 at December 31, 2018 and 2017, respectively. (5) Unsecured. b.1) Loans and financing Some financing agreements with the BNDES described above, have lower interest rates than those prevailing in the market. These operations fall within the scope of IAS 20 and thus the subsidies granted by BNDES were adjusted to present value and deferred in accordance with the useful lives of the financed assets, resulting in a balance as at December 31, 2018 of R$21,620 (R$32,155 at December 31, 2017) (Note 21). b.2) Financing - Suppliers Under bilateral agreements with suppliers, the Company obtained extension of the terms for payment of trade accounts payable at a cost based on the fixed CDI rate for the corresponding periods, with the net cost equivalent to between 107.9% to 115.9% of the CDI (101.4% to 109.4% of the CDI as at December 31, 2017). b.3) Debentures The following is a summary of the debentures in effect on December 31, 2018 and 2017. Amounts Issue Issue date Issued Outstanding Issue value 4th issue – Series 3 10/15/2009 810,000 23,557 810,000 1st issue – Minas Comunica 12/17/2007 5,550 5,550 55,500 4th issue 4/25/2013 130,000 130,000 1,300,000 5th issue 2/8/2017 200,000 200,000 2,000,000 6th issue 11/27/2017 100,000 100,000 1,000,000 Transaction costs in connection with the 4th, 5th and 6th issues, totaling R$3,951 at December 31, 2018 (R$5,422 at December 31, 2017), were allocated as a reduction of liabilities as costs to be incurred and are recognized as financial expenses, according to the contractual terms of each issue. b.4) Finance lease The Company has agreements classified as finance lease agreements in the condition of lessee relate to: (i) lease of towers and rooftops arising from sale and finance leaseback transactions; (ii) lease of Built to Suit ("BTS") sites to install antennas and other equipment and transmission facilities; (iii) lease of information technology equipment and; (iv) lease of infrastructure and transmission facilities associated with the power transmission network. The net carrying amount of the assets has remained unchanged until sale thereof, and a liability is recognized corresponding to the present value of mandatory minimum installments of the agreement. The amounts recorded in property, plant and equipment are depreciated over the estimated useful lives of the assets or the lease term, whichever is shorter. The balance of amounts payable relating to aforementioned transactions comprises the following effects: Nominal value payable 766,215 787,147 Unrealized financial expenses (373,188) (401,687) Present value payable 393,027 385,460 Current 53,133 51,036 Non-current 339,894 334,424 Aging list of finance lease payable at December 31, 2018 is as follows: Nominal value Present value payable payable Up to 1 year 60,823 53,133 From 1 to 5 years 207,450 146,797 Over five years 497,942 193,097 Total 766,215 393,027 There were no unsecured residual values resulting in benefits to the lessor or contingent payments recognized as revenue at December 31, 2018 and 2017. b.5) Contingent consideration As part of the Purchase and Sale Agreement and Other Covenants executed by and between the Company and Vivendi to acquire all shares in GVTPart., a contingent consideration relating to the judicial deposit made by GVT for the monthly installments of deferred income tax and social contribution on goodwill amortization was agreed, arising from the corporate restructuring process completed by GVT in 2013. If these funds are realized (being reimbursed, refunded, or via netting), they will be returned to Vivendi, as long as they are obtained in a final unappeasable decision. Reimbursement will be made within 15 years and this amount is subject to monthly restatement at the SELIC rate. c) Repayment schedule At December 31, 2018, the breakdown of non-current loans, financing, finance lease, debentures and contingent consideration by year of maturity was as follows: Loans and Contingent Year financing Debentures Finance lease Consideration Total 2020 359,948 1,025,097 41,441 — 1,426,486 2021 231,764 1,025,097 36,704 — 1,293,565 2022 209,948 999,755 35,190 — 1,244,893 2023 18,082 — 33,463 — 51,545 2024 onwards — — 193,096 465,686 658,782 Total 819,742 3,049,949 339,894 465,686 4,675,271 d) Covenants There are loans and financing with BNDES and debentures with specific covenants involving a penalty in the event of breach of contract. A breach of contract provided for in the agreements with the institutions listed above is characterized as non-compliance with covenants (analyzed on a quarterly, half-yearly or yearly basis), being a breach of a contractual clause, resulting in the early maturity of the contract. At December 31, 2018 and 2017 all economic and financial indexes established in existing contracts had been achieved. e) Changes Changes in loans and financing, debentures, finance lease agreements and contingent considerations are as follows: Loans and Finance Financing - Contingent financing Debentures lease Suppliers Consideration Total Balance at 12.31.16 4,158,015 3,554,307 374,428 722,591 414,733 9,224,074 Additions 55,876 3,000,000 13,462 571,444 — 3,640,782 Government grants (Note 21) (1,581) — — — — (1,581) Financial charges (Note 27) 300,153 485,295 45,265 70,603 31,411 932,727 Issue costs — (4,926) — — — (4,926) Foreign exchange variation (Note 27) 15,846 — — — — 15,846 Write-offs (payments) (2,025,963) (2,513,937) (47,695) (757,486) — (5,345,081) Balance at 12.31.17 2,502,346 4,520,739 385,460 607,152 446,144 8,461,841 Additions — — 18,672 506,397 — 525,069 Government grants (Note 21) (40) — — — — (40) Financial charges (Note 27) 169,771 242,415 45,501 33,169 19,542 510,398 Issue costs — 1,471 — — — 1,471 Foreign exchange variation (Note 27) 28,848 — — — — 28,848 Write-offs (payments) (1,118,355) (1,590,715) (56,606) (622,474) — (3,388,150) Balance at 12.31.18 1,582,570 3,173,910 393,027 524,244 465,686 6,139,437 f) Additions and payments The following is a summary of funding and payments made during the year ended December 31, 2018 and 2017. 2018 2017 Write-offs (payments) Write-offs (payments) Additions Principal Financial Total Additions Principal Financial Total Loans and financing — (961,687) (156,668) (1,118,355) 55,876 (1,781,261) (244,702) (2,025,963) BNDES — (946,763) (152,447) (1,099,210) 15,998 (825,256) (213,752) (1,039,008) BNB — (14,924) (4,221) (19,145) 39,878 (11,808) (4,073) (15,881) Resolution 4131 - Scotiabank and Bank of America — — — — — (944,197) (26,877) (971,074) Debêntures — (1,324,723) (265,992) (1,590,715) 3,000,000 (2,000,000) (513,937) (2,513,937) 4th issue – Series 3 — — (1,583) (1,583) — — (1,522) (1,522) 1st issue – Minas Comunica — (24,723) (1,082) (25,805) — — — — 3rd issue — — — — — (2,000,000) (246,817) (2,246,817) 4th issue — (1,300,000) (47,257) (1,347,257) — — (151,152) (151,152) 5th issue — — (149,795) (149,795) 2,000,000 — (114,446) (114,446) 6th issue — — (66,275) (66,275) 1,000,000 — — — Suppliers 506,397 (571,434) (51,040) (622,474) 571,444 (668,512) (88,974) (757,486) Finance lease 18,672 (35,375) (21,231) (56,606) 13,462 (35,722) (11,973) (47,695) Total 525,069 (2,893,219) (494,931) (3,388,150) 3,640,782 (4,485,495) (859,586) (5,345,081) f.1) In 2018 Debentures On February 8 and August 8, 2018, the semi-annual interest amounts of the 5th issue debentures were settled. The amounts paid in the settlement totaled R$149,795. On April 25, 2018, the debentures of the 4th issue were fully settled. The amounts paid in the settlement totaled to R$1,347,257. On May 27 and September 27, 2018, the semi-annual interest amounts of the 6th issue debentures were settled. The amounts paid in the settlement totaled R$66,275. On July 5, 2018, the 1st issue debentures (Telemig origin) were amortized. The amounts paid in settlement totaled to R$25,805, of which R$3,012 corresponded to the 1st series, R$8,285 to the 2nd series and R$14,508 to the 3rd series. On October 15, 2018, the annual interest amounts of the debentures of the 4th issue - Series 3 was settled. The amounts paid in liquidation totaled R$1,583. f.2) In 2017 Loans and financing Banco do Nordeste ("BNB") On May 12, 2017, draw-downs were made related to the agreement signed on August 18, 2014 in the total amount of R$39,878. The rates of this contract are 7.06% p.a. to 10.0% p.a., with total term of eight years, with interest payments and principal repayments in 72 monthly and successive installments. These resources were destined to investment and expansion projects for Brazil's Northeast region. BNDES FINEM Contract 14.2.1192.1: On December 30, 2014, a financing line of R$1,000,293 was contracted, with rates of: (i) Long-Term Interest Rate (“TJLP”) + 0 to 3.12% p.a; (ii) 4% p.a; (iii ) Selic + 2.32% p.a, with total term of eight years, with a grace period ending on January 15, 2018. After the grace period, interest and principal repayments will be paid in 60 monthly and successive installments; and (iv) 6% p.a. total term of seven years, with a grace period ending on January 15, 2017. After the grace period, interest and principal repayments will be paid in 60 monthly and successive installments. During 2017, three disbursements related to this agreement were made in the amount of R$15,998. These disbursements refer to a financial support plan linked to projects carried out in the 2014-2016 triennium, aiming at expansion in the areas of operation. Debentures 5th Issue At a meeting held on January 26, 2017, the Company's Board of Directors approved the 5th issue of simple debentures, non-convertible into shares of the Company, in a single series, unsecured, in the total amount of R$2,000,000, which were subject to public placement with restricted efforts, under a firm guarantee regime, in the terms of ICVM 476/09. On February 8, 2017, the Company issued 200,000 debentures, with a par value equivalent to R$10. The debentures have a maturity of five years and the nominal unit value of each of the debentures will not be monetarily restated. Remuneration interest corresponds to 108.25% of the accumulated variation of the average daily rates of one-day Interbank Deposits ("DI"). 6th Issue At a meeting held on November 13, 2017, the Company's Board of Directors approved the 6th issue of simple debentures, non-convertible into shares of the Company, in a single series, unsecured, in the total amount of R$1,000,000, which were subject to public placement with restricted efforts, under a firm guarantee regime, in the terms of ICVM 476/09. On November 27, 2017, the Company issued 100,000 debentures, with a par value equivalent to R$10. The debentures have a maturity of three years and the nominal unit value of each of the debentures will not be monetarily restated. Remuneration interest corresponds to 100.00% of the accumulated variation of the average daily rates of one-day DI, plus a spread equivalent to 0.24%. |
DEFERRED INCOME
DEFERRED INCOME | 12 Months Ended |
Dec. 31, 2018 | |
DEFERRED INCOME | |
DEFERRED INCOME | 21) DEFERRED INCOME Services and goods (1) — 301,292 Disposal of PP&E (2) 89,835 165,162 Activation revenue (3) — 7,959 Customer loyalty program (4) — 50,354 Government grants (5) 94,335 115,379 Contractual Liabilities - IFRS 15 (6) 532,207 — Other (7) 59,658 83,052 Total 776,035 723,198 Current 525,509 372,561 Non-current 250,526 350,637 (1) This refers mainly to the balances of revenues from recharging prepaid services, which are recognized in income as services that are provided to customers. It includes the amount of the agreement the Company entered for industrial use of its mobile network by a different SMP operator in Regions I, II and III of the general authorizations plan, which is intended solely for the rendering of SMP services by the operator for its customers. (2) Includes the net balances of the residual values from sale of non-strategic towers and rooftops, which are transferred to income as the conditions for recognition are fulfilled. (3) This refers to the deferred activation revenue (fixed) recognized in income over the estimated period in which a customer remains in the base. (4) This refers to points earned under the Company's loyalty program, which enables customers to accumulate points by paying bills relating to use of services offered. The balance represents the Company's estimate of customers exchanging points for goods and/or services in the future. (5) This refers to: i) government subsidy arising from funds obtained from BNDES credit lines to be used in the acquisition of domestic equipment, which have been amortized over the useful life cycle of the equipment; and ii) subsidies arising from projects related to state taxes, which are being amortized over the contractual period. (6) Refers to the balance of contractual liabilities arising from the adoption of IFRS 15 (Note 2.b) and amounts related to customer contracts (services and goods, activation revenue and customer loyalty program) were reclassified to the line of "Contractual Liabilities - IFRS 15". The amounts on December 31, 2018 were R$372,167, of which: (i) services and goods totaled R$318,778; and (ii) customer loyalty program totaled R$53,389. (7) Includes amounts of the reimbursement for costs for leaving radio frequency sub-bands 2,500MHz to 2,690MHz due to cancellation of the Multichannel Multipoint Distribution Service. |
OTHER LIABILITIES
OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
OTHER LIABILITIES | |
OTHER LIABILITIES | 22) OTHER LIABILITIES Authorization licenses (1) 124,807 258,742 Liabilities with related parties (Note 28) 31,716 125,987 Payment for license renewal (2) 222,143 167,536 Third-party withholdings (3) 120,711 144,593 Deficit in post-employment benefit plans (Note 30) 679,478 531,938 Amounts to be refunded to subscribers 56,897 189,380 Other liabilities 61,957 72,893 Total 1,297,709 1,491,069 Current 368,376 718,468 Non-current 929,333 772,601 (1) As at December 31, 2017, this included a portion of the Company's liability arising from an agreement entered into with ANATEL, whereby the operators that won the auction of the 4G licenses organized Entidade Administradora do Processo de Redistribuição e Digitalização de Canais de TV e RTV ("EAD"), which will be responsible for equally performing all TV and RTV channel redistribution procedures and solutions to harmful interference in radio communication systems, in addition to other operations in which the winning operators have obligations, as defined in the agreement. On January 31, 2018, the Company paid R$142,862 to EAD, referring to the last installments of the auction of 700 MHz national frequency bands for the provision of SMP, performed by ANATEL on September 30, 2014. (2) This refers to the cost of renewing STFC and SMP licenses. (3) This refers to payroll withholdings and taxes withheld from pay-outs of interest on equity and on provision of services. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
EQUITY | |
EQUITY | 23) EQUITY a) Capital According to its Articles of Incorporation, the Company is authorized to increase its share capital up to 1,850,000,000 common and preferred shares. The Board of Directors is the competent body to decide on any increase and consequent issue of new shares within the authorized capital limit. Nevertheless, Brazil’s Corporation Law (Law nº 6404/76, Article 166, item IV) - establishes that capital may be increased by means of a Special Shareholders’ Meeting Resolution to decide about amendments to the Articles of Incorporation, if the authorized capital increase limit has been reached. Capital increases do not necessarily observe the proportion between the number of shares of each class to be maintained, however the number of non-voting or restricted-voting preferred shares must not exceed 2/3 of total shares issued. Preferred shares are non-voting, except for cases set forth in Articles 9 and 10 of the Articles of Incorporation but have priority in the event of reimbursement of capital, without premium, and are entitled to dividends 10% higher than those paid on common shares, as per Article 7 of the Company's Articles of Incorporation and item II, paragraph 1, Article 17 of Law No. 6404/76. Preferred shares are also entitled to full voting rights if the Company fails to pay the minimum dividend to which they are entitled for three consecutive financial years and this right will be kept until payment of said dividend. Subscribed and paid-in capital at December 31, 2018 and 2017 amounted to R$63,571,416, divided into shares without par value, held as follows: Common Shares Preferred Shares Grand Total Shareholders Number % Number % Number % Controlling Group 540,033,264 94.47 % 704,207,855 62.91 % 1,244,241,119 73.58 % Telefónica Latinoamérica Holding, S.L. 46,746,635 8.18 % 360,532,578 32.21 % 407,279,213 24.09 % Telefónica 198,207,608 34.67 % 305,122,195 27.26 % 503,329,803 29.76 % SP Telecomunicações Participações 294,158,155 51.46 % 38,537,435 3.44 % 332,695,590 19.67 % Telefónica Chile 920,866 0.16 % 15,647 0.00 % 936,513 0.06 % Other shareholders 29,320,789 5.13 % 415,131,868 37.09 % 444,452,657 26.28 % Treasury Shares 2,290,164 0.40 % 983 0.00 % 2,291,147 0.14 % Total shares 571,644,217 100.00 % 1,119,340,706 100.00 % 1,690,984,923 100.00 % Treasury Shares (2,290,164) (983) (2,291,147) Total shares outstanding 569,354,053 1,119,339,723 1,688,693,776 b) Capital reserves b.1) Special goodwill reserve This represents the tax benefit generated by the merger of Telefonica Data do Brasil Ltda. which will be capitalized in favor of the controlling shareholders (SPTE Participações Ltda) after the tax credits are realized under the terms of CVM Ruling No. 319/99. The balance of this account at December 31, 2018 and 2017 totaled R$63,074. b.2) Other capital reserves The breakdown as at December 31, 2018 and 2017 was as follows. Excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date (1) 2,735,930 2,735,930 Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (2) (112,107) (112,107) Direct costs of capital increases (3) (62,433) (62,433) Incorporation of shares of GVTPart. (4) (1,188,707) (1,188,707) Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData (5) (75,388) (75,388) Preferred shares delivered referring to the judicial process of expansion plan (6) 2 2 Effects of the acquisition of Terra Networks Brasil by TData (7) (59,029) (59,029) Other 10 — Total 1,238,278 1,238,268 (1) Refers to the excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date. (2) The cancellation of 2,332,686 shares issued by the Company, held in treasury, approved at the Special Shareholders' Meeting held on March 12, 2015. (3) Refers to direct costs (net of taxes) of Company capital increases on April 28, 2015 and April 30, 2015, arising from the Primary Offering of Shares. (4) Refers to the difference between the economic values of the merger of shares of GVTPart. and market value of shares, issued on the transaction closing date. (5) Regarding the effects of the acquisition of shares of non-controlling shareholders that, with the adoption of IFRS 10 35 and 36, would be recorded in equity when there is no change in the shareholding control. (6) Refers to the effects of write-offs due to the transfer of 62 preferred shares in treasury to outstanding shares, for compliance with judicial process decisions in which the Company is involved regarding rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996. (7) Refers to the effects of TData's acquisition of Terra Networks, related to the difference between the consideration given in exchange for the equity interest obtained and the value of the net assets acquired (Note 1 c.2). b.3) Treasury shares These are equity instruments that are repurchased and recognized at cost and deducted from shareholders' equity. No gain or loss is recognized in the income statement on the purchase, sale, issue or cancellation of the equity instruments of the Company. The Company's shares held in treasury whose balance is resulting: (i) from the exercise of the right to withdraw from the Company's common and preferred shareholders, who expressed their dissent regarding the acquisition of GVTPart.; (ii) the acquisition of preferred shares in the financial market in accordance with the share buyback program in effect at the time of the transaction; and (iii) transfers of preferred shares, related to compliance with court decisions in which the Company is involved, which deals with rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996. The table below shows the changes in this caption for the years ended December 31, 2018 and 2017. Shares In thousands of Treasury stock Common shares Preferred shares Total reais At 12.31.16 2,290,164 339 2,290,503 (87,790) Acquisition of shares in the financial market (2) — 706 706 (32) Transfer of lawsuits concerning judicial proceedings (1) — (62) (62) 2 At 12.31.17 2,290,164 983 2,291,147 (87,820) At 12.31.18 2,290,164 983 2,291,147 (87,820) (1) The Company acquired preferred shares issued by the Company in the financial market: (i) on June 1, 2017, 45 shares at a unit price of R$ 47.31, totaling R$ 2; and (ii) on July 5, 2017, 661 shares at a unit price of R$45.26, totaling R$32. (2) Refers to the transfer of preferred shares in treasury to outstanding shares to comply with decisions of lawsuits in which the Company is involved that deals with rights to the complementary receipt of shares calculated in relation to plans to expand the network after 1996. c) Income reserves c.1) Legal Reserve This reserve is obligatorily constituted by the Company on the basis of 5% of net income for the year, up to 20% of the paid-in capital stock. The legal reserve may only be used to increase share capital and to offset accumulated losses. c.2) Expansion and Modernization Reserve This reserve is constituted based on the capital budget, whose purpose is to guarantee the expansion of the network capacity to meet the Company's increasing demand and guarantee the quality of service rendering. In accordance with Article 196 of Law No. 6404/76, the capital budget will be submitted for appreciation and approval by the Shareholders' Meeting. c.3) Tax Incentives The Company has State VAT (ICMS) tax benefits in the states of Minas Gerais and Espírito Santo, relating to tax credits approved by the relevant bodies of said states, in connection with investments in the installation of SMP support equipment, fully operational, in accordance with the rules in force, ensuring that the localities listed in the call for bid be included in the SMP coverage area. The portion of profit subject to the incentive was excluded from dividend calculation and may be used only in the event of capital increase or loss absorption. The amounts of the income reserves are distributed as follows: Expansion and Modernization Legal reserve Reserve Tax incentives Total At 12.31.16 1,907,905 550,000 17,069 2,474,974 Reversal of reserves — (550,000) — (550,000) Recording of reserves 230,439 297,000 10,815 538,254 At 12.31.17 2,138,344 297,000 27,884 2,463,228 Reversal of reserves — (297,000) — (297,000) Recording of reserves 446,413 1,700,000 11,529 2,157,942 At 12.31.18 2,584,757 1,700,000 39,413 4,324,170 d) Dividend and interest on equity d.1) Additional dividends proposed for 2017 On April 12, 2017, the Company's Ordinary General Meeting approved the allocation of proposed additional dividends for 2017, not yet distributed, amounting to R$2,191,864 to the holders of common and preferred shares that were registered in the Company's records at the end of the day of the Ordinary General Meeting. The amount was paid as at December 11, 2018. d.2) Remuneration to shareholders The dividends are calculated in accordance with the Company Articles of Incorporation and the Corporation Law. The table below shows the calculation of dividends and interest on equity for 2018 and 2017: Net income for the year 8,928,258 4,608,790 Allocation to legal reserve (446,413) (230,439) (-) Tax incentives - not distributable (11,529) (10,815) Adjusted net income 8,470,316 4,367,536 Dividend and IOE distributed for the year: (4,550,000) (2,416,639) Interest on equity (gross) (4,550,000) (2,416,639) Balance of unallocated net income 3,920,316 1,950,897 (+) Reversal special reserve for modernization and expansion 297,000 550,000 (-) Effects of the initial adoption of IFRS 9 and 15, net of taxes in 01.01.18 (138,663) — (+) Unclaimed dividends and interest on equity 152,770 101,778 (+-) Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes (62,739) (113,811) Income available to be distributed 4,168,684 2,488,864 Proposal for Distributions: Special reserve for modernization and expansion 1,700,000 297,000 Additional proposed dividends 2,468,684 2,191,864 Proposed additional dividends - Net income for the year 2,171,684 1,641,864 Proposed additional dividends - Based on prior year's net income, referring to the reversal of the special reserve for expansion and modernization 297,000 550,000 Total 4,168,684 2,488,864 Mandatory minimum dividend - 25% of adjusted net income 2,117,579 1,091,884 The proposal by management of the 2018 financial year, presented above, will be submitted to the General Shareholders’ Meeting to be held in 2019. The proposal by management of the 2017 financial year, presented above, was submitted and approved at the General Shareholders’ Meeting held on April 12, 2018. Total proposed for deliberation - per share Common shares 1.371013 1.217277 Preferred shares (1) 1.508114 1.339005 (1) 10% higher than the amount allocated to each common share, under Article 7 of the Company Articles of Incorporation. In 2018 and 2017, the Company allocated interim dividends and interest on equity, which were allocated to mandatory minimum dividends, as follows: 2018 Dates Gross Amount Net Value Amount per Share (1) Beginning of Approval Credit Payment Common Preferred (2) Total Common Preferred (2) Total Common Preferred (2) 06/18/18 06/29/18 Until 12/31/19 126,479 273,521 400,000 107,507 232,493 340,000 0.188823 0.207705 09/05/18 09/17/18 Until 12/31/19 885,353 1,914,647 2,800,000 752,550 1,627,450 2,380,000 1.321761 1.453937 12/04/18 12/17/18 Until 12/31/19 426,867 923,133 1,350,000 362,837 784,663 1,147,500 0.637278 0.701006 Total 1,438,699 3,111,301 4,550,000 1,222,894 2,644,606 3,867,500 2017 Dates Gross Amount Net Value Amount per Share (1) Beginning of Approval Credit Payment Common Preferred (2) Total Common Preferred (2) Total Common Preferred (2) 02/13/17 02/24/17 08/21/18 56,916 123,084 180,000 48,379 104,621 153,000 0.084970 0.093467 03/20/17 03/31/17 08/21/18 110,669 239,331 350,000 94,069 203,431 297,500 0.165220 0.181742 06/19/17 06/30/17 08/21/18 30,039 64,961 95,000 25,533 55,217 80,750 0.044845 0.049330 09/18/17 09/29/17 08/21/18 96,440 208,560 305,000 81,974 177,276 259,250 0.143978 0.158375 12/14/17 12/26/17 08/21/18 470,072 1,016,567 1,486,639 399,561 864,082 1,263,643 0.701779 0.771957 Total 764,136 1,652,503 2,416,639 649,516 1,404,627 2,054,143 (1) The amounts of IOE are calculated and stated net of IRRF. The immune shareholders received the full IOE amount, without withholding income tax at source. (2) The gross and net values for the preferred shares are 10% higher than those attributed to each common share, as per Article 7 of the Company's Articles of Incorporation. d.3) Unclaimed dividends and interest on equity Pursuant to Article 287, paragraph II, item “a” of Law No. 6404, of December 15, 1976, the dividends and interest on equity unclaimed by shareholders expire in three years, as from the initial payment date. The Company reverses the amount of unclaimed dividends and IOE to equity upon expiry. For the years ended December 31, 2018 and 2017, the Company reversed unclaimed dividends and interest on equity amounting to R$152,770 and R$101,778, respectively, which were included in calculations for decisions on Company dividends. e) Other comprehensive income Financial assets at fair value through other comprehensive income: These refer to changes in fair value of financial assets available for sale. Derivative financial instruments: These refer to the effective part of cash flow hedges up to the balance sheet date. Currency translation effects for foreign investments: This refers to currency translation differences arising from the translation of financial statements of Aliança (joint venture). Changes in other comprehensive income are as follows: Financial assets at Currency translation fair value through other effects - foreign comprehensive income Derivative transactions investments Total Balances at 12/31/16 (8,881) 3,549 16,793 11,461 Translation gains — — 11,239 11,239 Losses from future contracts — (1,595) — (1,595) Gains on financial assets at fair value through other comprehensive income 223 — — 223 Balances at 12/31/17 (8,658) 1,954 28,032 21,328 Translation gains — — 9,927 9,927 Losses from future contracts — (1,618) — (1,618) Losses on financial assets at fair value through other comprehensive income (412) — — (412) Balances at 12/31/18 (9,070) 336 37,959 29,225 f) Company share repurchase program In 2018 and 2017, the Company's Board of Directors, in accordance with Article 17, item XV of the Bylaws, approved programs for the repurchase of common and preferred shares issued by the Company itself, pursuant to CVM Instruction 567, of September 17, 2015, which had as their objective the acquisition of common and preferred shares issued by the Company for subsequent cancellation, sale or maintenance in treasury, without reducing the capital stock, to increase shareholder value through the efficient application of available resources in cash and optimize the Company's capital allocation, as follows: In 2018, according to the meeting held on December 20, 2018. The repurchase will be made through the use of the balance of capital reserve included in the balance sheet of September 30, 2018. This program will be in force until June 6, 2020, with the acquisitions made at B3, at market prices, observing the legal and regulatory limits. The maximum amounts authorized for acquisition will be 583,422 common shares and 37,736,465 preferred shares. · In 2017, according to the meeting held on June 9, 2017. The repurchase was made through the use of the capital reserve balance included in the balance sheet as at March 31, 2017. This program was effective until December 8, 2018, with the acquisitions made at B3, at market prices, observing the legal and regulatory limits. The maximum amounts authorized for acquisition were 870,781 common shares and 41,510,761 preferred shares. During the period of validity of the program, the Company acquired 45 and 661 preferred shares of its issuance at an average unit price of R$47.31 and R$45.26, respectively on June 1, 2017 and on July 5, 2017, totaling R$32. g) Earnings per share Basic and diluted earnings per share were calculated by dividing profit attributed to the Company’s shareholders by the weighted average number of outstanding common and preferred shares for the year. The table below sets out the calculation of earnings per share for the years ended December 31, 2018, 2017 and 2016: Net income for the year 8,928,258 4,608,790 4,085,242 Common shares 2,823,093 1,457,288 1,291,743 Preferred shares 6,105,165 3,151,502 2,793,499 Number of shares (thousands): 1,688,694 1,688,694 1,688,694 Weighted average number of outstanding common shares for the year 569,354 569,354 569,354 Weighted average number of outstanding preferred shares for the year 1,119,340 1,119,340 1,119,340 Basic and diluted earnings per share: Common shares 4.96 2.56 2.27 Preferred shares 5.45 2.82 2.50 |
NET OPERATING REVENUE
NET OPERATING REVENUE | 12 Months Ended |
Dec. 31, 2018 | |
NET OPERATING REVENUE | |
NET OPERATING REVENUE | 24) NET OPERATING REVENUE a) Accounting policy Recognition of revenues from services and goods With the adoption of IFRS 15 on January 1, 2018, for packages combining various fixed network, mobile, data, internet or television products or services, total revenue is now allocated to each performance obligation based on its independent selling prices in relation to the total consideration of the package and recognized when (or as soon as) the obligation is met, regardless of whether or not items are delivered. When packages include a discount on the equipment, there is an increase in revenues recognized for the sale of handsets and other equipment, to the detriment of ongoing service revenue over subsequent periods. To the extent that the packages are marketed at a discount, the difference between the revenue from the sale of equipment and the consideration received from the customer in advance is recognized as a contractual asset in the statement of financial position. Revenues correspond substantially to the value of the consideration received or receivable arising from the provision of telecommunications, communications, sales of goods, advertising and other revenues, and are presented net of taxes, rebates and returns (in the case of sale of goods), incident on them. Revenues from sales of public telephone cards and prepaid cellular recharge credits, as well as the respective taxes due are deferred and recognized in income as services are effectively rendered. Revenues from leasing contracts for equipment classified as financial leasing ("Soluciona IT" product) are recognized at the installation of the equipment, at which time the actual transfer of risk occurs. Revenues are recognized at the present value of future minimum contract payments. Revenue from the sale of appliances to dealers is accounted for at the time of delivery and not at the time of sale to the final customer. Revenues from services and goods are basically subject to the following indirect taxes: ICMS or ISS (as the case may be), PIS and COFINS, as the case may be. Customer Loyalty Program The Company has a loyalty points program that enables customers to accumulate points when they pay bills regarding the usage of the services offered. The accumulated points may be exchanged for telephone sets or services, conditional upon obtaining a minimum balance of points by the customer. The consideration received is allocated to the cost of sets or services at fair value. The fair value of points is determined by dividing the amount of discount granted by the number of points necessary for the redemption based on the points program. The portion of revenue related to the fair value of the accumulated balance of points generated is deferred and recognized as revenue upon redemption of points. The number of points to be accounted for is determined through statistical techniques that consider assumptions and historical data on expected redemption rates, expiration percentages and cancellation of points, among other factors. b) Critical estimates and judgments The Company estimates the fair value of points attributed under the customer loyalty program by applying statistic techniques. Inputs for the model include assumptions about expected redemption rates, the mix of products that will be available for future redemption and customers’ preference in relation to points use. These estimates are subject to variations and uncertainties due to changes in the behavior of customer redemptions. The Company has billing systems for services with intermediate cut-off dates. Thus, at the end of each month there are revenues already received by the Company, but not effectively invoiced to its customers. These unbilled revenues are recorded based on estimates, which take into account historical consumption data, number of days elapsed since the last billing date, among others. Because historical data are used, these estimates are subject to significant uncertainties. c) Breakdown Gross operating revenue 65,794,397 66,243,174 Services (1) 61,292,362 62,696,433 Sale of goods (2) 4,502,035 3,546,741 Deductions from gross operating revenue (22,331,657) (23,036,342) (22,498,269) Taxes (14,559,915) (16,058,584) (15,388,784) Services (13,820,784) (15,468,315) (14,780,018) Sale of goods (739,131) (590,269) (608,766) Discounts granted and return of goods (7,771,742) (6,977,758) (7,109,485) Services (6,288,941) (5,340,476) (5,612,695) Sale of goods (1,482,801) (1,637,282) (1,496,790) Net operating revenue 43,462,740 43,206,832 42,508,459 Services 41,182,637 41,887,642 41,120,386 Sale of Goods 2,280,103 1,319,190 1,388,073 (1) These include telephone services, use of interconnection network, data and SVA services, cable TV and other services. (2) These include sale of goods (handsets, SIM cards and accessories) and equipment of “Soluciona TI”. No one customer contributed more than 10% of gross operating revenue for the years ended December 31, 2018, 2017 and 2016. All amounts in net income are included in the income and social contribution tax bases. The information for the year ended December 31, 2018 includes the effects of the adoption of IFRS 15. To facilitate the understanding and comparability of information, the Company discloses in Note 35 the consolidated income statement for the year ended December 31, 2018, excluding the effects of adopting IFRS 15. |
OPERATING COSTS AND EXPENSES
OPERATING COSTS AND EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
OPERATING COSTS AND EXPENSES | |
OPERATING COSTS AND EXPENSES | 25) OPERATING COSTS AND EXPENSES 2018 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (872,032) (2,574,498) (549,610) (3,996,140) Third-party services (2) (6,656,924) (6,989,006) (1,237,527) (14,883,457) Rental, insurance, condominium and connection means (3) (2,957,489) (147,613) (202,881) (3,307,983) Taxes, charges and contributions (4) (1,594,836) (30,703) (36,122) (1,661,661) Estimated impairment losses on accounts receivable (Note 4) — (1,533,660) — (1,533,660) Depreciation and amortization (5) (6,487,909) (1,352,638) (528,076) (8,368,623) Cost of goods sold (2,406,099) — — (2,406,099) Materials and other operating costs and expenses (50,478) (204,623) (44,754) (299,855) Total (21,025,767) (12,832,741) (2,598,970) (36,457,478) 2017 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (845,358) (2,387,314) (493,095) (3,725,767) Third-party services (2) (7,032,252) (7,438,937) (1,232,379) (15,703,568) Rental, insurance, condominium and connection means (3) (2,624,405) (151,455) (204,701) (2,980,561) Taxes, charges and contributions(4) (1,792,764) (39,050) (34,779) (1,866,593) Estimated impairment losses on accounts receivable (Note 4) — (1,481,015) — (1,481,015) Depreciation and amortization (5) (5,963,153) (1,433,297) (457,284) (7,853,734) Cost of goods sold (1,955,890) — — (1,955,890) Materials and other operating costs and expenses (58,708) (205,406) (20,867) (284,981) Total (20,272,530) (13,136,474) (2,443,105) (35,852,109) 2016 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (976,233) (2,136,399) (747,156) (3,859,788) Third-party services (2) (7,629,246) (7,216,894) (1,254,187) (16,100,327) Rental, insurance, condominium and connection means (3) (2,326,219) (141,135) (220,655) (2,688,009) Taxes, charges and contributions (4) (1,861,237) (5,933) (92,394) (1,959,564) Estimated impairment losses on accounts receivable (Note 4) — (1,348,221) — (1,348,221) Depreciation and amortization (5) (5,821,620) (1,408,866) (423,920) (7,654,406) Cost of goods sold (2,118,940) — — (2,118,940) Materials and other operating costs and expenses (89,519) (197,918) (55,074) (342,511) Total (20,823,014) (12,455,366) (2,793,386) (36,071,766) (1) (2) (3) (4) (5) |
OTHER OPERATING INCOME (EXPENSE
OTHER OPERATING INCOME (EXPENSES) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER OPERATING INCOME (EXPENSES) | |
OTHER OPERATING INCOME (EXPENSES) | 26) OTHER OPERATING INCOME (EXPENSES) Recovered expenses and fines (1) 3,962,150 355,415 504,877 Provisions for labor, tax and civil contingencies (Note 19) (2) (1,258,966) (999,419) (985,176) Net gain (loss) on asset disposal/loss (3) 114,853 108,767 463,602 Other operating income (expenses) (367,115) (187,249) (51,977) Total 2,450,922 (722,486) (68,674) Other operating income 4,077,003 464,182 968,479 Other operating expenses (1,626,081) (1,186,668) (1,037,153) Total 2,450,922 (722,486) (68,674) (1) (2) (3) The transaction was recognized as sale and leaseback as provided under IAS 17. Management analyzed each asset leased back and classified them as operating or finance leases in accordance with IAS 17 qualitative and quantitative criteria. Risks and benefits relating to these towers have been transferred to their purchasers, with the exception of several towers for which transfer of risks and benefits was not possible. For these items, the amount was recognized as deferred revenue (Note 19). |
FINANCIAL INCOME (EXPENSES)
FINANCIAL INCOME (EXPENSES) | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INCOME (EXPENSES) | |
FINANCIAL INCOME (EXPENSES) | 27) FINANCIAL INCOME (EXPENSES) a) Accounting policy These include interest, and monetary and exchange variations arising from short-term investments, derivative transactions, loans, financing, debentures, present value adjustments of transactions that generate monetary assets and liabilities and other financial transactions. These are recognized on an accrual basis when earned or incurred by the Company. For all financial instruments measured at amortized cost and interest-yielding financial assets classified as financial assets at fair value through other comprehensive income, interest income or expense is recognized using the effective interest method, which exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or liability. b) Breakdown Financial Income Interest income 246,083 655,474 719,399 Interest receivable (customers, taxes and other) 118,476 124,391 104,837 Gain on derivative transactions (Note 31) 305,996 373,971 994,801 Foreign exchange variations on loans and financing (Note 20) 32,326 113,203 487,747 Other revenues from foreign exchange and monetary variation (1) 3,341,211 406,013 374,169 Other financial income 68,548 82,906 100,406 Total 4,112,640 1,755,958 2,781,359 Financial Expenses Loan, financing, debenture and finance lease charges (Nota 20) (510,398) (932,727) (1,061,098) Foreign exchange variation on loans and financing (Note 20) (61,174) (129,049) (214,952) Loss on derivative transactions (Note 31) (295,208) (415,956) (1,342,671) Interest payable (financial institutions, provisions, trade accounts payable, taxes and other) (186,238) (136,425) (278,175) Other expenses with foreign exchange and monetary variation (963,463) (876,948) (830,466) IOF, Pis, Cofins and other financial expenses (2) (269,006) (167,897) (288,538) Total (2,285,487) (2,659,002) (4,015,900) Financial income (expenses), net 1,827,153 (903,044) (1,234,541) (1) |
BALANCES AND TRANSACTIONS WITH
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | 12 Months Ended |
Dec. 31, 2018 | |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | 28) BALANCES AND TRANSACTIONS WITH RELATED PARTIES a) Balances and transactions with related parties The main balances of assets and liabilities with related parties arises from transactions with companies related to the controlling group carried out at the prices and other commercial conditions agreed in contracts between the parties as follows: a) Fixed and mobile telephony services provided by Telefónica Group companies; b) Digital TV services provided by Media Networks Latino America; c) Lease, maintenance of safety equipment and civil construction services, provided by Telefônica Inteligência e Segurança Brasil; d) Corporate services passed through at the cost effectively incurred for these services; e) Right to use certain software licenses, including maintenance and support, provided by Telefónica Global Technology; f) International transmission infrastructure for several data circuits and roaming services provided by Telxius Cable Brasil, Telefónica International Wholesale Services Espanha, Telefónica USA; and Media Net Br; g) Operations by Telefónica Group companies, relating to the purchase of internet content, advertising and auditing services; h) Marketing services provided by Telefónica Group companies; i) Information access services through the electronic communications network, provided by Telefonica de Espanha; j) Data communication services and integrated solutions provided by Telefónica International Wholesale Services Espanha and Telefónica USA; k) Long distance call and international roaming services provided by Telefónica Group companies; l) Sundry expenses and costs to be reimbursed by Telefónica Group companies; m) Brand fee for assignment of rights to use the brand paid to Telefónica; n) Platform of health services provided by Aximed; o) Cost Sharing Agreement for digital-business related expenses reimbursed to Telefónica Digital; p) Leases/rentals of Telefónica Group companies’ buildings; q) Financial Clearing House roaming, inflows of funds for payments and receipts arising from roaming operation between group companies operated by Telfisa; r) Integrated e-learning, online education and training solutions provided by Telefônica Serviços de Ensino; s) Factoring transactions, credit facilities for services provided by the Group's suppliers; t) Social investment in Fundação Telefônica, innovative use of technology to enhance learning and knowledge, contributing to personal and social development; u) Contracts or agreements assigning user rights for cable ducts, optical fiber duct rental services, and right-of-way related occupancy agreements with several highway concessionaires provided by Companhia AIX; v) Adquira Sourcing platform - online solution provided by Telefónica Compras Electrónicas to transact purchase and sale of all types of goods and services; w) Digital media; marketing and sales, in-store and outdoor digital marketing services provided by Telefônica On The Spot Soluções Digitais Brasil; x) Sale/transfer of the Company's towers and customer portfolio to Telxius Torres Brasil; y) Amounts to be reimbursed by SPTE as a result of contractual clause of the purchase of Terra Networks Brasil equity interest; z) Sale of digital products, creation of an exclusive band channel that responds to the commercial demand for these digital services and products; and aa) Hosting services, housing and telecommunications solutions for the corporate market provided by Acens. As described in Note 30, the Company and its subsidiaries sponsor pension plans and other post-employment benefits for its employees with Visão Prev and Sistel. The following table summarizes the consolidated balances with related parties: Balance Sheet - Assets 12/31/18 12/31/17 Cash and Cash and Companies Type of transaction equivalents Accounts Other assets equivalents Accounts receivable, Other assets Parent Companies SP Telecomunicações Participações d) / l) / y) — — 10,083 — 531 46 Telefónica LatinoAmerica Holding l) — — 60,387 — — 135,486 Telefónica l) / z) — 9,300 29,757 — 492 158 — 9,300 100,227 — 1,023 135,690 Other Group companies Colombia Telecomunicaciones ESP k) / l) — 1,334 520 — 1,210 4,505 Media Networks Brasil Soluções Digitais a) / d) /f) / l) / p) — 903 4,051 — 1,017 2,106 T.O2 Germany GMBH CO. OHG k) — 20,877 — — 22,315 — Telefónica Venezolana k) — 5,926 2,196 — 6,067 — Telefônica Digital España g) / l) — 197 294 — 1,929 — Telefônica Factoring do Brasil a) / d) / l) / s) — 6,360 133 — 12,337 93 Telefónica Global Technology l) — — — — — 13,600 Telefônica Inteligência e Segurança Brasil a) / d) / l) — 800 986 — 271 1,013 Telefónica International Wholesale Services Espanha j) / k) — 46,537 — — 69,087 — Telefônica Serviços de Ensino a) / p) — 286 — — 175 — Telefónica Moviles Argentina k) — 5,074 — — 7,194 — Telefónica Moviles Del Espanha k) — 7,576 — — 8,918 — Telefónica USA (1) j) — 9,005 — — 7,157 — Telfisa Global BV q) 46,755 — — 9,523 — — Telxius Cable Brasil a) / d) / l) / p) — 11,628 5,295 — 28,981 819 Telxius Torres Brasil d) / p) / x) — 6,776 4,268 — 14,666 5,106 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia g) / h) — 5,341 — — 7,822 — Other a) / d) / k) / g) / h) / l) / p) — 10,894 2,806 — 10,852 3,801 46,755 139,514 20,549 9,523 199,998 31,043 Total 46,755 148,814 120,776 9,523 201,021 166,733 Current assets 46,755 148,814 114,715 9,523 201,021 164,249 Non-current assets — — 6,061 — — 2,484 Balance Sheet - Liabilities 12.31.18 12.31.17 Trade accounts Trade accounts payable and payable and Companies Type of transaction other payables Other liabilities other payables Other liabilities Parent Companies SP Telecomunicações Participações y) — 21,901 6,656 15,000 Telefónica LatinoAmerica Holding l) — — 86 — Telefónica l) / m) 687 1,393 1,205 99,950 687 23,294 7,947 114,950 Other Group companies Colombia Telecomunicaciones ESP k) 1,056 — 471 — Fundação Telefônica l) — 82 — 137 Media Networks Latina America SAC b) 10,212 — 4,248 — Media Networks Brasil Soluções Digitais f) 44,693 318 33,751 318 T.O2 Germany GMBH CO. OHG k) 5,706 — 5,477 — Telefónica Venezolana k) 5,410 — 5,240 — Telefónica Compras Electrónicas v) 32,582 — 24,311 — Telefônica Digital España o) 43,340 — 46,645 — Telefônica Factoring do Brasil l) / s) — 2,770 — 146 Telefónica Global Technology e) 28,750 — 15,671 — Telefônica Inteligência e Segurança Brasil c) / l) 52,184 27 15,336 27 Telefónica International Wholesale Services Espanha f) / k) 26,097 — 44,240 8 Telefônica Serviços de Ensino r) 22,518 — 37,931 — Telefónica Moviles Argentina k) 4,160 — 3,865 — Telefónica Moviles Del Espanha k) 5,233 — 3,589 — Telefónica USA (1) f) 4,411 200 7,425 171 Telxius Cable Brasil f) / l) 39,662 2,067 44,037 2,068 Telxius Torres Brasil x) 38,735 1,926 37,718 7,757 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia h) 1,766 — 907 — Other k) / h) / l) / u) / w) / aa) 16,310 1,032 12,035 405 382,825 8,422 342,897 11,037 Total 383,512 31,716 350,844 125,987 Current liabilities 383,512 22,220 350,844 124,749 Non-current liabilities — 9,496 — 1,238 Income statement 2018 2017 2016 Cost and Cost and Cost and other other other expenses expenses expenses Operating (revenues) Financial Operating (revenues) Financial Operating (revenues) Financial Companies Type of transaction revenues operating result revenues operating result revenues operating result Parent Companies SP Telecomunicações Participações d) — 347 — — 268 — — 67 — Telefónica LatinoAmerica Holding l) — 16,466 9,077 — 36,523 11,030 — 87,526 4,348 Telefónica l) / m) — (373,690) (16,680) — (331,684) (996) — (319,708) (9,727) — (356,877) (7,603) — (294,893) 10,034 — (232,115) (5,379) Other Group companies Colombia Telecomunicaciones ESP k) 250 (4,280) (2,145) 349 (10) 604 217 (2,845) (926) Companhia AIX de Participações a) / u) 75 (22,645) — 36 (22,738) — 67 (21,316) — Fundação Telefônica t) — (12,223) — — (11,395) — - (10,530) — Media Networks Brasil Soluções Digitais a) / d) / f) / p) 2,006 (101,272) — 601 (57,177) — 572 (3,451) — Media Networks Latina America SAC b) — (34,791) (1,007) — (33,133) (516) - (17,133) (50) Telefônica Serviços de Ensino a) / p) / r) 1,158 (49,130) — 292 (54,781) — 2 (47,544) 1,311 T.O2 Germany GMBH CO. OHG k) 148 (1,975) — 75 (1,409) — 45 (4,527) — Telefónica Compras Electrónicas v) — (34,534) — — (29,062) — — (42,889) — Telefônica Digital España l) / o) — (124,537) (813) — (81,893) (2,600) — (44,872) (1,262) Telefônica Factoring do Brasil a) / d) / l) / s) 2,416 212 2,601 69 828 61 41 200 — Telefónica Global Technology e) / l) — (36,738) (4,134) — (36,395) 40 — (28,933) (756) Telefônica Inteligência e Segurança Brasil a) / c) / d) / l) / p) 1,568 (54,210) — 706 (40,918) — 1,041 (39,709) 389 Telefónica International Wholesale Services Espanha f) / j) / k) 53,357 (64,036) 9,771 56,728 (49,960) (2,564) 72,520 (56,293) (15,008) Telefónica Moviles Argentina k) 5,916 (3,437) — 3,746 6,147 — 3,072 (9,112) — Telefónica Moviles Del Chile k) 1,293 (3,159) 39 1,586 (2,196) 52 1,074 (1,096) (80) Telefónica Moviles Del Espanha k) (209) (4,166) — 1,048 (1,969) — (836) (2,170) — Telefónica USA (1) f) / j) 1,518 (19,441) (539) 2,392 (13,202) (2,185) 2,998 (14,970) (349) Telxius Cable Brasil a) / d) / f) / l) / p) 49,777 (206,095) (7,896) 15,045 (200,537) 787 17,624 (246,595) 244 Telxius Torres Brasil d) / l) / p) / x) 3,218 (129,706) — — (107,373) — 31 (72,460) 1,929 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia h) — (2,794) 1,450 — 1,072 (59) — — — Other a) / d) / f) / i) / k) / l) / n) / p) / w) 3,547 (23,957) (283) 7,725 (27,213) 130 18,375 (47,679) 2,367 126,038 (932,914) (2,956) 90,398 (763,314) (6,250) 116,843 (713,924) (12,191) Total 126,038 (1,289,791) (10,559) 90,398 (1,058,207) 3,784 116,843 (946,039) (17,570) (1) Terra Networks Operations values were reclassified in 2017 for better comparability, as a result of its incorporation by Telefónica USA in 2018. b) Management compensation Consolidated key management personnel compensation paid by the Company to its Board of Directors and Statutory Officers for the years ended December 31, 2018 and 2017 totaled R$26,431 and R$21,684, respectively. Of this amount, R$17,493 (R$14,439 at December 31, 2017) corresponds to salaries, benefits and social charges and R$8,938 (R$7,245 at December 31, 2017) to variable compensation. These amounts were recorded as expenses with personnel under the general and administrative expenses group of accounts (Note 25). For the years ended December 31, 2018 and 2017, the Company’s Directors and Officers did not receive any pension, retirement pension or other similar benefits. |
SHARE-BASED PAYMENT PLANS
SHARE-BASED PAYMENT PLANS | 12 Months Ended |
Dec. 31, 2018 | |
SHARE-BASED PAYMENT PLANS | |
SHARE-BASED PAYMENT PLANS | 29 ) SHARE-BASED PAYMENT PLANS a) Accounting policy The Company and subsidiaries measure the cost of transactions settled with shares issued by the parent company (Telefónica), to its officers and employees. The Company and its subsidiaries measure the cost of transactions settled with employees and officers based on shares issued by the parent company (Telefónica), by reference to the fair value of the shares at the date at which they are granted, using the binomial valuation model. This fair value is charged to the income statement over the period until the vesting date. The Company and its subsidiaries reimburse Telefónica for the fair value of the benefit delivered on the grant date to the officers and employees. b) Information on share-based payment plans Telefónica, as the Company's parent company, has different share-based payment plans which are also offered to management and employees of its subsidiaries, including the Company and its subsidiaries. The granting of shares is conditional upon: (i) maintenance of an active employment relationship within the Telefónica Group on the cycle consolidation date; and (ii) achievement, by Telefónica, of results representing fulfillment of the objectives established for the plan. The level of success is based on a comparison of growth in Telefónica shareholder earnings, including their quotations and dividends (Total Shareholder Return - “TSR”), compared with the growth in TSR for companies of the Group in an established basis of comparison and the Telefónica Group's FCF. At December 31, 2018, the value of Telefónica’ share price was Eur 7.3309. The expenses of the Company and its subsidiaries with the share-based compensation plans described above, where applicable, are recorded as personnel expenses, divided into the groups cost of services, selling expenses and general and administrative expenses (Note 25), corresponding to R$10,433 and R$7,013 for the years ended December 31, 2018 and 2017. The main plans in effect at December 31, 2018 are detailed below: b.1) Talent for the Future Share Plan (“TFSP”) Telefónica’s 2014 General Shareholders’ Meeting approved a long-term program to reward the global commitment, outstanding performance and high potential of its executives by awarding Telefónica shares. Participants are not required to pay for their initial options. Initially, the plan is expected to remain effective for three years. The cycle began on October 1, 2014 through to September 30, 2017. The number of shares is reported at the beginning of the cycle and shares will be transferred to participants three years after the grant date if their targets have been met. In the cycles of these programs (2014-2017/2015-2018) the TSR was not achieved, and therefore Telefónica shares were not awarded to the Company’s executives. Telefónica's Annual Shareholders' Meeting, held on June 8, 2018, approved a long-term program with the objective of rewarding the commitment, outstanding performance and high potential of its executives at a global level with the attribution of shares of Telefónica. Participants do not have to pay for their assigned initial actions. The total planned duration of the plan is three years. The beginning of the cycle was January 1, 2018 and will extend until December 31, 2020. The number of shares is announced at the beginning of the cycle and after the three years period from the grant date, the shares will be transferred to the participants if the goal is achieved. The 2018-2020 cycle (January 1, 2018 to December 31, 2020): includes the potential rights to receive 122,250 shares of Telefónica (which includes initial amounts). b.2) Perform Share Plan (“PSP”) Telefónica's Annual Shareholders' Meeting, held on June 8, 2018, approved a long-term program with the objective of rewarding the commitment, outstanding performance and high potential of its Directors at the global level with the attribution of shares of Telefónica. Participants do not have to pay for their assigned shares. The total planned duration of the plan is three years. The cycles are independent of each other. The number of shares is announced at the beginning of the cycle and after the three years period from the grant date, the shares will be transferred to the participants if the target is reached. The 2018-2020 cycle (January 1, 2018 to December 31, 2020): includes 113 active executives (including three executives appointed under the Company's Bylaws), with the potential right to receive 977,737 shares of Telefónica. |
PENSION PLANS AND OTHER POST-EM
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | 12 Months Ended |
Dec. 31, 2018 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | 30) PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS a) Accounting policy The Company and its subsidiaries individually sponsor pension funds of post-retirement benefits for active and retired employees, in addition to a multisponsor supplementary retirement plan and health care plan for former employees. Contributions are determined on an actuarial basis and recorded on an accrual basis. Liabilities relating to defined benefit plans are determined based on actuarial evaluations at each year-end, in order to ensure that sufficient reserves have been set up for both current and future commitments. Actuarial liabilities related to defined benefit plans were calculated using the projected unit credit method. Actuarial gains and losses are recognized immediately in equity (in other comprehensive income). For plans with defined contribution characteristics, the obligation is limited to the contributions payable, which are recognized in the P&L in the respective accrual periods. The asset or liability related to defined benefit plan to be recognized in the financial statements corresponds to the present value of the obligation for the defined benefit (using a discount rate based on long-term National Treasury Notes - “NTNs”), less the fair value of plan assets that will be used to settle the obligations. Plan assets are assets held by a privately-held supplementary pension plan entity. Plan assets are not available to the Company’s creditors or those of its subsidiaries and cannot be paid directly to the Company or its subsidiaries. The fair value is based on information on market prices and, in the case of securities quoted, on the purchase price disclosed. The value of any defined benefit asset then recognized is limited to the present value of any economic benefits available as a reduction in future plan contribution from the Company. Actuarial costs recognized in the income statement are limited to the service cost and cost of interest on the defined benefit plan obligation. Any changes in the measurement of plan assets and obligations are initially recognized in other comprehensive income, and immediately reclassified to retained earnings in P&L. The Company and its subsidiaries manages and individually sponsors a health care plan for retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98 (which provides for private health care and health insurance plans). As provided for in Articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. b) Critical estimates and judgments The cost of pension plans with defined benefits and other post-employment health care benefits and the present value of the pension obligation are determined using actuarial valuation methods. Actuarial valuation involves use of assumptions about discount rates, future salary increases, mortality rates and future increases in pension and annuity benefits. The obligation for defined benefits is highly sensitive to changes in these assumptions. All assumptions are reviewed on an annual basis. The mortality rate is based on publicly available mortality tables in the country. Future salary increases, and pension increases are based on expected future inflation rates for the country. c) Information on pension plans and other post-employment benefits The plans sponsored by the Company and its subsidiaries and the related benefit types are as follows: Plan Type Entity Sponsor PBS-A Defined benefit (DB) Sistel Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás PAMA / PCE Defined benefit (DB) Sistel Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás Healthcare - Law No. 9656/98 Defined benefit (DB) Telefônica Brasil Telefônica Brasil, Terra Networks and TGLog CTB Defined benefit (DB) Telefônica Brasil Telefônica Brasil Telefônica BD Defined benefit (DB) VisãoPrev Telefônica Brasil VISÃO Defined contribution (DC) / Hybrid VisãoPrev Telefônica Brasil, Terra Networks and TGLog The Company has participation in the decisions that directly affect the governance of the plans, with members nominated for both the Deliberative Council and the Fiscal Council of the administrators Sistel and Visão Prev. The defined benefit obligation is made up of different components, according to the pension characteristic of each plan, and may include the actuarial liabilities of supplementary pension liabilities, health care benefits to retirees and dependents or compensation for death or disability of members. This liability is exposed to economic and demographic risks, such as: (i) increases in medical costs that could impact the cost of health care plans; (ii) salary growth; (iii) long-term inflation rate; (iv) nominal discount rate; and (v) life expectancy of members and pensioners. The fair value of plan assets is primarily comprised of fixed income investments (NTN's, LFT’s, LTN's, repurchase agreements, CDBs, debentures, letters of guarantee and FIDC shares) and equity investments (highly liquid, well regarded, large company shares and investments in market indices). Due to the concentration of fixed income and floating rate investments plan assets are mainly exposed to the risks inherent in the financial market and economic environment such as: (i) market risk in the economic sectors where variable income investments are concentrated; (ii) risk events that impact the economic environment and market indices where variable income investments are concentrated; and (iii) the long-term inflation rate that may erode the profitability of fixed income investments at fixed rates. The companies that administer post-employment benefits plans sponsored by the Company (Visão Prev and Sistel) seek to meet the flows of assets and liabilities through the acquisition of fixed income securities and other long-term assets. With the exception of the Companhia Telefônica Brasileira ("CTB") deficit plans and the healthcare plan under Law No. 9656/98, generally all benefit plans that have funds constituted present a surplus position. The economic benefit recorded in the Company's assets or that of its subsidiaries does not reflect the total surplus determined in these plans. The economic benefit stated under assets considers only the portion of the surplus which presents a real possibility of recovery. The means of plan surplus recovery is solely through reductions in future contributions and given that not all plans currently receive enough contributions for full recovery of surpluses, the economic benefit recorded under assets is limited to the total possible recovery amount in accordance with projected future contributions. The position of plan assets is at December 31, 2018 and 2017, respectively, and plan assets were apportioned based on the Company’s actuarial liabilities in relation to the total actuarial liabilities of the plan. The actuarial gains and losses generated in each year are immediately recognized in equity (in other comprehensive income). The following is a summary of the pension plans and other post-employment benefits: c.1) Post-Employment Health Benefits Plans The actuarial valuation made for the PAMA health plan used the registration of the participants with a base date of October 31, 2018, projected for December 31, 2018, while the actuarial valuation made for the health plan Law No. 9,656/98 used the registration of the participants with a base date of September 30, 2018, projected for December 31, 2018. For comparative exercises, the actuarial valuation made for the PAMA health plans and Law 9,656/98 used the participants of October 31, 2017, projected for December 31, 2017. c.1.1) Healthcare Plan to Retirees and Special Coverage Program (PAMA and PAMA-PCE) The Company, together with other companies of the former Telebrás System, at shared cost, sponsor health care plans (PAMA and PAMA-PCE) to retirees. These plans are managed by Fundação Sistel and are closed plans, not admitting new members. Contributions to the plans are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution are at the fixed percentage of payroll of employees covered by the Telefônica BD plan. c.1.2) Health care plan – Law No. 9656/98 The Company manages and together with its subsidiaries sponsors a health care plan to retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98. As provided for in Articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. Benefitted participants are classified as retirees and their dependents and dismissed employees and their dependents. Retirees and dismissed employees, in order to keep their right to the benefits, must make contributions to the plan in accordance with the contribution tables by age bracket established by carriers and/or insurance companies. c.2) Post-employment Social Security Plans The actuarial valuation made for the CTB pension plan used the registration of the participants with a base date of July 31, 2018, projected for December 31, 2018 and the registration of the participants with a base date of August 31, 2017, projected for December 31, 2017. The actuarial valuation made for all other pension plans (PBS-A, Telefônica BD, TCO Prev and Visão plans) used the register of the participants with a base date of July 31, 2018, projected for December 31, 2018 and the with a base date of July 31, 2017, projected for December 31, 2017. On August 15, 2018, Visão Prev obtained approvals from the National Supplementary Pension Authority ("PREVIC") for the incorporation of the TCO Prev plan into the Visão Telefônica and Telefônica BD plans. In this way, as of November 1, 2018, all participants in the TCO Prev plan became participants in the BD Phone and Telephone Vision plans, according to their profile. This unification preserves all vested rights and gives participants of the corporate plan access to the benefits of the BD Phone and Telephone Vision plans. The main objective of the spin-off and incorporation is to create greater synergy of the benefits offered to the participants. They include the PBS Assisted Plans (“PBS-A"), CTB, Telefônica DB and Visão. c.2.1) PBS Assisted Plan (PBS-A) The PBS-A plan is a defined benefit private pension plan managed by Sistel and sponsored by the Company jointly with the other telecommunications companies originating in the privatization of the Telebrás System. The plan is subject to funding by sponsors in the case of any asset insufficiency to ensure pension supplementation of participants in the future. The PBS-A plan comprises assisted participants of the Sistel Benefit Plan who were already retirees on January 31, 2000, from all the participating sponsors, with joint liability of all sponsors to the plan and Sistel. Although the PBS-A plan had assets in excess of actuarial liabilities at December 31, 2018 and 2017, such surplus was not recognized due to lack of legal provision in relation to refund thereof, and in addition, since it is not a contributive plan, it is not possible to make any deduction from future contributions. c.2.2) CTB Plan Contributions to the CTB plan are determined based on actuarial valuations prepared by independent actuaries, in accordance with the rules in force in Brazil. The funding procedure is the capitalization method and the sponsor’s contribution is a fixed percentage of payroll of employees covered by the plan. The Company also individually manages and sponsors the CTB plan, originally provided to former employees of CTB who were in the Company in 1977, with whom an individual retirement concession agreement was executed to encourage their resignation. This is an informal pension supplementation benefit paid to former employees directly by the Company. These plans are closed, and no other members are admitted. c.2.3) Telefônica DB Plan The Company individually sponsors a defined benefit retirement plan, the Telefônica DB plan. In order to improve allocation of Telefônica DB plan assets and analyze the coverage ratio of plan obligations in future years, a stochastic ALM study was prepared by Visão Prev and Willis Towers Watson. This ALM study aimed at projecting the ratio between coverage of liabilities (solvency ratio) and the risk of mismatching measured by the standard deviation of the solvency ratio. The study concluded that the plan present sustainable projection of their coverage ratio with the current investments portfolio. At the time of the concession, a benefit is calculated, which will be paid in a lifelong form and updated by inflation. This plan is not open to new accessions. The contributions are defined according to the costing plan, which is calculated considering financial, demographic and economic hypotheses in order to accumulate enough resources to pay the benefits to the participants who are already receiving them, and to the new pensions. c.2.4) VISÃO Plans The Visão Telefônica and Visão Multi plans will hereinafter be shown jointly under the name VISÃO, due to their similarity. The Company and its subsidiaries sponsor defined contribution pension plans with defined benefit components (hybrid plans), i.e. the VISÃO Plans, managed by Visão Prev. The contribution is attributed to each subsidiary in the economic and demographic proportion of its respective obligation to the plan. The contributions made by the Company and subsidiaries related to defined contribution plans totaled R$39,967 at December 31, 2018 (R$43,702 at December 31, 2017). The contributions to the Visão Telefônica and Visão Multi plans are: (i) basic and additional contribution, with contributions made by the participant and sponsor; and (ii) additional, sporadic and specific contribution, with contributions made only by the participant. In addition, the participant has the possibility to choose one of five investment profiles to apply to their balance, and they are: Super Conservative, Conservative, Moderate, Aggressive and Aggressive Fixed Income Long-Term. c.3) Consolidated information on pension plans and other post-employment benefits c.3.1) Reconciliation of net liabilities (assets): 12.31.18 12.31.17 Post- Post- Post- Post- retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total Present value of DB plan obligations 2,011,355 1,313,157 3,324,512 1,861,651 1,050,576 2,912,227 Fair value of plan assets 2,999,669 763,325 3,762,994 2,585,679 726,060 3,311,739 Net liabilities (assets) (988,314) 549,832 (438,482) (724,028) 324,516 (399,512) Asset limitation 1,056,682 50,281 1,106,963 791,177 130,440 921,617 Non-current assets (10,997) — (10,997) (9,833) — (9,833) Current liabilities 8,114 11,553 19,667 7,914 9,021 16,935 Non-current liabilities 71,251 588,560 659,811 69,068 445,935 515,003 c.3.2) Total expenses recognized in the income statement: 2018 2017 2016 Post- Post- Post- Post- Post- Post- retirement retirement retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total pension plans health plans Total Current service cost 2,931 13,722 3,044 7,606 2,811 2,761 5,572 Net interest on net actuarial assets/liabilities 6,074 45,892 51,966 5,258 29,325 34,583 5,278 2,986 8,264 Total 9,005 59,614 68,619 8,302 36,931 45,233 8,089 5,747 13,836 c.3.3) Amounts recognized in other comprehensive income (loss) 2018 2017 2016 Post- Post- Post- Post- Post- Post- retirement retirement retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total pension plans health plans Total Actuarial (losses) gains (186,170) 184,527 (1,643) 325,292 208,195 533,487 (174,496) 240,072 65,576 Asset limitation effect 188,259 (93,125) 95,134 (309,780) (52,411) (362,191) 182,088 (10,897) 171,191 Total 2,089 91,402 93,491 15,512 155,784 171,296 7,592 229,175 236,767 c.3.4) Changes in amount net of liability (asset) of defined benefit, net 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Net defined benefit liability (asset) at the beginning of the year 67,148 454,957 522,105 54,026 264,603 318,629 Business combinations — — — (12) 680 668 Expenses 9,005 59,614 68,619 8,302 36,931 45,233 Sponsor contributions (9,874) (5,860) (15,734) (10,680) (3,041) (13,721) Amounts recognized in OCI 2,089 91,402 93,491 15,512 155,784 171,296 Net defined benefit liability (asset) at the end of the year 68,368 600,113 668,481 67,148 454,957 522,105 Actuarial assets per balance sheet (10,997) — (10,997) (9,833) — (9,833) Actuarial liabilities per balance sheet 79,365 600,113 679,478 76,982 454,956 531,938 c.3.5) Changes in defined benefit liability 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Defined benefit liability at the beginning of the year 1,861,651 1,050,576 2,912,227 1,763,866 767,642 2,531,508 Liability assumed after acquisition of company — — — 249 680 929 Current service costs 2,931 13,722 16,653 3,044 7,606 10,650 Interest on actuarial liabilities 173,842 103,617 277,459 181,208 82,488 263,696 Benefits paid (136,916) (37,838) (174,754) (168,856) (30,777) (199,633) Member contributions paid 451 — 451 220 — 220 Actuarial losses (gains) adjusted by experience 80,126 64,278 144,404 (23,613) 128,469 104,856 Actuarial losses (gains) adjusted by demographic assumptions — 46,122 46,122 (3,320) (1,543) (4,863) Actuarial losses (gains) adjusted by financial assumptions 29,270 72,680 101,950 108,853 96,011 204,864 Defined benefit liability at the end of the year 2,011,355 1,313,157 3,324,512 1,861,651 1,050,576 2,912,227 c.3.6) Changes in the fair value of plan assets 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Fair value of plan assets at the beginning of the year 2,585,679 726,060 3,311,739 2,703,593 667,993 3,371,586 Asset acquired on acquisition of company — — — 323 — 323 Benefits paid (128,991) (32,011) (161,002) (160,370) (27,767) (188,137) Participants contributions paid 451 — 451 220 — 220 Sponsor contributions paid 1,949 33 1,982 2,195 31 2,226 Interest income on plan assets 245,014 70,690 315,704 283,090 71,061 354,151 Return on plan assets excluding interest income 295,567 (1,447) 294,120 (243,372) 14,742 (228,630) Fair value of plan assets at the end of the year 2,999,669 763,325 3,762,994 2,585,679 726,060 3,311,739 c.3.7) Changes in asset limitation 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Asset Limitation at the beginning of the year 791,177 130,440 921,617 993,754 164,953 1,158,707 Interest on the asset limitation 77,246 12,966 90,212 107,140 17,898 125,038 Changes in the assets limitation, except interest 188,259 (93,125) 95,134 (309,779) (52,411) (362,190) Effect generated by company acquisition — — — 62 — 62 Asset Limitation at the end of the year 1,056,682 50,281 1,106,963 791,177 130,440 921,617 c.3.8) Results projected for 2019 Post-retirement Post-retirement pension plans health plans Total Current service cost 3,076 16,178 19,254 Net interest on net defined benefit liability/asset 5,762 56,551 62,313 Total 8,838 72,729 81,567 c.3.9) Sponsoring company contributions projected for 2019 Post-retirement Post-retirement pension plans health plans Total Sponsor contributions 2,221 8,114 10,335 Benefits paid directly by the sponsor 35 11,559 11,594 Total 2,256 19,673 21,929 c.3.10) Average weighted duration of defined benefit liability Post-retirement Post-retirement pension plans health plans In 2018 7.8 years 16.5 years In 2017 8.5 years 18.7 years c.3.11) Actuarial assumptions 12.31.18 Post-retirement pension plans Post-retirement health plans Discount rate to present value of defined benefit liability Visão: 9.0% Future salary growth rate PBS-A: N/A N/A Medical expense growth rate N/A Nominal annual adjustment rate of pension benefits N/A Medical service eligibility age N/A Eligibility on retirement 100% to 57 years Estimated retirement age PBS-A, CTB and Telefônica BD: 57 years 57 years Mortality table for nondisabled individuals PBS-A, CTB and Telefônica BD: AT- 2000 Basic segregated by gender, down-rated by 10% Visão: AT-2000 Basic segregated by gender, down-rated by 50% AT-2000 Basic segregated by gender, down-rated by 10% Mortality table for disabled individuals PBS-A, CTB and Telefônica BD: RP- 2000 Disabled Female, down-rated by 40% Visão: N/A RP-2000 Disabled Female, down-rated by 40% Disability table Telefônica BD: Light-Forte Light-Forte Turnover PBS-A, CTB and Telefônica BD: N/A PAMA and PCE: N/A 12.31.17 Post-retirement pension plans Post-retirement health plans Discount rate to present value of defined benefit liability Visão: 9.5% Future salary growth rate PBS-A: N/A N/A Medical expense growth rate N/A Nominal annual adjustment rate of pension benefits N/A Medical service eligibility age N/A Eligibility on retirement 100% to 57 years Estimated retirement age PBS-A, CTB and Telefônica BD: 57 years 57 years Mortality table for nondisabled individuals PBS-A, CTB and Telefônica BD: AT-2000 Basic AT-2000 Basic segregated by gender, down-rated by 10% Mortality table for disabled individuals PBS-A, CTB and Telefônica BD: RP-2000 Disabled RP-2000 Disabled Female, down-rated by 40% Disability table PBS-A, CTB, Telefônica BD and Tcoprev: Light-Forte Light-Forte Turnover PBS-A, CTB, Telefônica BD and Tcoprev: N/A PAMA and PCE: N/A Further to the assumptions stated above, other assumptions common to all plans were adopted in 2018 and 2017 as follows: (i) Long-term inflation rate 4.3%; and (ii) Annual increase in the use of medical services according to age: 4.0%. c.3.12) Changes in actuarial assumptions in relation to the prior year In order to adjust some actuarial assumptions to the economic and demographic reality, a study was conducted for the plans administered by Visão Prev and Sistel, which adopted the definition of the assumptions in their Deliberative Councils. The main economic and financial assumptions that have changed in relation to the previous fiscal year and that interfere with the defined benefit liability are: (i) rates for discount to present value of the defined benefit liability; (ii) long-term inflation rate; (iii) rate of future wage growth; (iv) rate of growth of medical costs; and (v) annual nominal index of adjustment of social security benefits. The impacts on the plans’ defined benefit liabilities due to the new definition of the actuarial assumptions are as follows: Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, based on current actuarial assumptions 2,011,355 1,313,157 3,324,512 Defined benefit liability, based on prior-year actuarial assumptions 1,982,085 1,194,355 3,176,440 Difference from change in actuarial assumptions 29,270 118,802 148,072 c.3.13) Sensitivity analysis for actuarial assumptions The Company believes that the significant actuarial assumptions with reasonable likelihood of variation due to financial and economic scenarios, which could significantly change the amount of the defined benefit obligation, are the discount rate used to adjust the defined benefit liability to present value and the rate of growth of medical costs. Sensitivity analysis of the defined benefit liability for scenarios involving a 0.5% increase and a 0.5% decrease in the discount rate used to discount the defined benefit liability to present value is as follows: Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, discounted to present value at current rate 2,011,355 1,313,157 3,324,512 Defined benefit liability, discounted to present value considering a rate increased by 0.5% 1,934,817 1,219,080 3,153,897 Defined benefit liability, discounted to present value considering a rate decreased by 0.5% 2,093,908 1,419,123 3,513,031 The following is a sensitivity analysis of the defined benefit obligation for scenarios of 1% increase and 1% reduction in the rate of growth of medical costs: Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, projected by the current medical cost growth rate 2,011,355 1,313,157 3,324,512 Defined benefit liability, projected by the current medical cost growth considering a rate increased by 1% 2,011,355 1,535,641 3,546,996 Defined benefit liability, projected by the current medical cost growth considering a rate decreased by 1% 2,011,355 1,135,030 3,146,385 c.3.14) Allocation of plan assets 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans pension plans health plans Investments with market value quoted in active market: Fixed income investments National Treasury Note (NTN) 2,437,547 702,946 1,998,931 670,516 Treasury Financial Letter 177,319 — 199,135 55,544 Repurchase operations 196,830 — 142,228 — Debentures 13,487 — 13,209 — Treasury Financial Letter (LFT) 12,556 60,379 4,567 — FIDC shares / Others 2,356 — 3,694 — National Treasury Notes (LTN) 462 — 2,165 — Bank Deposit Certificates (CDB) 232 — 1,317 — Variable income investments Investments in energy sector 138 — 57,781 — Investments in food and beverage industry 17,921 — 32,337 — Investments in mining sector 287 — 1,197 — Investments in other sectors (1) 5,822 — 7,124 — Real estate investments 111,417 — 96,525 — Loans to participants 19,312 — 18,346 — Structured investments 743 — 3,753 — Investments with market value not quoted in active market: Loans to participants 1,249 — 1,590 — Structured investments 1,991 — 1,780 — Total 2,999,669 763,325 2,585,679 726,060 (1) Investments in variable income in the following industries: oil, gas and biofuel; telephony; steel and metals; construction and engineering; sales and distribution; transportation; wood and paper; education; financial services and banks; real estate, among; others. |
FINANCIAL INSTRUMENTS AND RISK
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | 31) FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT a) Accounting policy a.1) Financial assets Initial recognition and measurement On initial recognition, a financial asset is classified in the following measurement categories: (i) at fair value through profit or loss; (ii) at amortized cost; or (iii) at fair value through other comprehensive income, depending on the situation. The classification of financial assets according to IFRS 9 is generally based on the business model in which a financial asset is managed and its characteristics of contractual cash flows. The Company’s consolidated financial assets include cash and cash equivalents, trade accounts receivable, short-term investments pledged as collateral and derivative financial instruments. Subsequent measurement Subsequent measurement of financial assets depends on their classification, as follows: Financial assets at fair value through profit or loss : these assets are subsequently measured at fair value. Net income, including interest, is recognized directly in income. Financial assets at amortized cost : these assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in income. Any gain or loss on derecognition is recognized in profit or loss. Financial assets at fair value through other comprehensive income : these assets are subsequently measured at fair value. Interest income is calculated using the effective interest method, and foreign exchange gains and losses and impairment are recognized in profit or loss. Other net income is recognized in other comprehensive income. In derecognition, the accumulated result in other comprehensive income is reclassified to the income statement. Derecognition A financial asset (or, whenever the case, a part of a financial asset, or a part of a group of similar financial assets) is derecognized when: The rights to receive the cash flows from the asset have expired; The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. a.2) Impairment of financial assets The Company and its subsidiaries evaluate, at the balance sheet date, if there is any objective evidence indicating that the financial asset or group of financial assets is not recoverable. A loss only exists if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after initial recognition of the asset (a “loss event” occurred) and such event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reasonably estimated. The carrying amount of an asset is reduced by a provision and the loss amount is recognized in the income statement. If, in a subsequent year, estimated impairment increases or decreases due to an event after impairment recognition, impairment loss previously recognized will be adjusted accordingly. Should a written-off asset be recovered in the future, such recovery is recognized in the income statement. a.3) Financial liabilities Initial recognition and measurement Upon initial recognition, the Company’s financial liabilities are classified in the following categories: financial liabilities measured at fair value through profit or loss and other financial liabilities. Financial liabilities are initially recognized at fair value plus, in the case of loans and financing, transaction cost directly attributable thereto. The Company’s consolidated financial liabilities include trade accounts payable, loans and financing, debentures, finance lease agreements, contingent payments and derivative financial instruments. Subsequent measurement Measurement of financial liabilities depends on their classification, as follows: Financial liabilities at fair value through profit or loss : financial liabilities are designated at initial recognition at fair value through profit or loss. This category also includes derivative financial instruments contracted, except those designated as derivative financial instruments of cash flow hedge. Interest, monetary and exchange variations and changes arising from the valuation at fair value, when applicable, are recognized in the income statement when incurred. Financial liabilities at amortized cost : after initial recognition, loans and financing subject to interest are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement at the time of write-off of liabilities, as well as during the amortization process using the effective interest rate method. Derecognition A financial liability is derecognized when the obligation has been revoked, cancelled or has expired. When an existing financial liability is replaced by another of the same lender, and the terms of the instruments are substantially different, or when the terms of an existing debt instrument are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference in the corresponding carrying amounts is recognized in the income statement. a.4) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability will take place (i) in the principal market for the asset or liability; or (ii) in the absence of a principal market, in the most advantageous market for that asset or liability. The Company and or its subsidiaries must have access to the principal (or most advantageous) market. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing an asset or liability, assuming that market participants act in their best economic interests. Fair value measurement of a non-financial asset takes into consideration the capacity of a market participant to generate economic benefits through the best use of the asset or selling it to another market participant that would also make the best use of the asset. The Company and its subsidiaries use adequate valuation techniques in the circumstances and for which there is sufficient data to measure the fair value, that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. For assets and liabilities recurrently recognized in the financial statements, the Company determines whether there were transfers between the hierarchy levels, revaluating the classification (based on the lowest level input that is significant to the overall fair value measurement) at the end of each reporting period. For the purposes of fair value disclosures, the Company and its subsidiaries determined classes of assets or liabilities based on the nature, characteristics and risks of those assets or liabilities and the fair value hierarchy level, as mentioned above. a.5) Financial instruments - net Financial assets and liabilities are presented net in the balance sheet if, and only if, there is a current enforceable legal right to offset the amounts recognized and if there is an intention to offset or realize the asset or settle the liability simultaneously. a.6) Derivative financial instruments and hedge accounting IFRS 9 introduced a new accounting record model for hedges, which is less restrictive, which aligns the accounting treatment with risk management activities by requiring an economic relationship between the hedged item and the hedging instrument and that the coverage ratio is the same as the entity applies to its risk management. With this new model, the documentation criteria for hedging relationships are modified and improvements are included in the disclosures about hedging activities. The Company uses derivative financial instruments, such as currency and interest rate swaps or currency non- deliverable forward contracts to hedge against currency risks. Derivative financial instruments designated in hedge transactions are initially recognized at fair value on the date on which the derivative contract is entered into, and subsequently revalued also at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive and as financial liabilities when the fair value of the instrument is negative. Any gains or losses resulting from changes in fair value of derivatives during the year are posted directly to the income statement, except for the effective portion of cash flow hedges, which is recognized directly in equity as other comprehensive income and subsequently reclassified to P&L when the hedged item affects P&L. On the inception initial recognition of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk, the nature of unhedged risks, the prospective statement of hedge effectiveness and how the Company shall assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. For the purpose of hedge accounting, hedges are classified as cash flow hedges and fair value hedges. Cash flow hedges Cash flow hedges meeting the recording criteria are accounted for as follows: (i) the portion of gain or loss from the hedge instrument determined as an effective hedge shall be recognized directly in equity (other comprehensive income), and (ii) the ineffective portion of gain or loss from the hedge instrument shall be recognized in the income statement. When the Company’s documented risk management strategy for any given hedge relationship excludes from the hedge effectiveness evaluation any particular component of gain or loss or the corresponding cash flows from the hedge instrument, that gain or loss component is recognized in financial income (expenses). Amounts recorded in other comprehensive income are immediately transferred to the income statement when the hedged transaction affects P&L. When a hedged item is the cost of a non-financial asset or liability, amounts recorded in equity are transferred at the initial carrying amount of the non-financial assets and liabilities. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge fails to meet the hedge accounting criteria, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs or the firm commitment is fulfilled. The Company's contracts are classified as cash flow hedges when they provide protection against changes in cash flows that are attributable to a particular risk associated with a recognized liability that may affect the profit or loss and fair value when they provide protection against exposure to changes in the fair value of the identified part of certain liabilities that is attributable to a particular risk (exchange variation) and may affect the profit or loss. Fair value hedges Fair value hedges meeting the accounting criteria are accounted for as follows: (i) gain or loss from changes in fair value of a hedge instrument shall be recognized in the income statement as finance costs; and (ii) gain or loss from a hedged item attributable to the hedged risk shall adjust the recorded amount of the hedged item to be recognized in the income statement, as finance costs. For fair value hedges relating to items carried at amortized cost, any adjustment to carrying amount is amortized through profit or loss over the remaining term of the hedge using the effective interest method. The effective interest rate amortization may begin as soon as any adjustment exists and no later than the point that the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in the income statement. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss. Classification between current and non-current Derivative financial instruments are classified as current and non-current or segregated into short and long-term portions based on an evaluation of the contractual cash flows. When the Company maintains a derivative as an economic hedge (and does not apply hedge accounting), for a period exceeding 12 months after the balance sheet date, the derivative is classified as non-current (or segregated into current and non-current portions), in line with the classification of the corresponding item. Derivative instruments that are designated as effective hedging instruments are classified consistently with the classification of the underlying hedged item. The derivative instrument is segregated into current and non-current portions only when amounts can be reliably allocated. b) Critical estimates and judgments When the fair value of financial assets and liabilities stated in the balance sheet cannot be obtained in active markets, it will be determined using valuation techniques, including the discounted cash flow method. Data for these methods is based on those adopted in the market, whenever possible. However, when this is not feasible, a certain level of judgment is required for fair value determination. Judgment includes consideration of the inputs used, such as liquidity risk, credit risk and volatility. Changes in the assumptions about these factors could affect the reported fair value of financial instruments. c) Derivative transactions The derivative financial instruments contracted by the Company are mainly intended to hedge against foreign exchange risk arising from assets and liabilities in foreign currency, risk of inflation on its debentures and leases indexed to the IPCA and against the risk of changes in the TJLP of a portion of debt with BNDES. There are no derivative financial instruments for speculative purposes and possible currency risks are hedged. Management understands that the Company's internal controls for its derivatives are adequate to control risks associated with each strategy for the market. Gains/losses obtained or sustained by the Company in relation to its derivatives show that its risk management has been appropriate. As long as these derivatives contracts qualify for hedge accounting, the hedged item may also be adjusted to fair value, offsetting the result of the derivatives, according to the rules of hedge accounting. This hedge accounting applies both to financial liabilities and probable cash flows in foreign currency. At December 31, 2018 and 2017, the Company held no embedded derivatives contracts. Derivatives contracts include specific penalties for breach of contract. Breach of contract provided for in agreements made with financial institutions leads to the anticipated liquidation of the contract. c.1) Fair value of derivative financial instruments The valuation method used to calculate the fair value of financial liabilities (if applicable) and derivative financial instruments was the discounted cash flow method, based on expected settlements or realization of liabilities and assets at market rates prevailing at the balance sheet date. The fair values of positions in reais are calculated by projecting future inflows from transactions using B3 yield curves discounting these flows to present value using market DI rates for swaps announced by B3. The market values of foreign exchange derivatives were obtained using the market exchange rates in effect at the balance sheet date and projected market rates obtained from the currency's coupon-rate yield curves. The linear convention of 360 calendar days was used to determine coupon rates of positions indexed in foreign currencies, while the exponential convention of 252 business days was used to determine coupon rates for positions indexed to CDI rates. Consolidated derivatives financial instruments shown below are registered with B3 and classified as swaps, usually, that do not require margin deposits. Accumulated effects from fair value Notional Value Amount receivable (payable) Description Long position 1,184,064 1,181,056 95,533 164,405 Foreign Currency 335,194 326,149 50,536 102,876 US$ (1) (2) 241,332 201,445 24,608 49,110 EUR (2) 51,971 11,000 — 449 LIBOR US$ (1) 41,891 113,704 25,928 53,317 Floating rate 699,595 657,868 7,737 28,263 CDI (1) (2) 554,336 263,518 — 82 TJLP (4) 145,259 394,350 7,737 28,181 Inflation rates 149,275 197,039 37,260 33,266 IPCA (3) (5) 149,275 166,775 37,260 33,266 IGPM (6) — 30,264 — — Short position (1,184,064) (1,181,056) (39,383) (20,651) Floating rate (608,782) (860,686) (24,916) (15,819) CDI (1) (2) (3) (4) (5) (6) (608,782) (860,686) (24,916) (15,819) Foreign Currency (575,282) (320,370) (14,467) (4,832) US$ (2) (439,103) (183,824) (9,396) (2,471) EUR (1) (2) (115,233) (79,694) (222) (464) LIBOR US$ (1) (20,946) (56,852) (4,849) (1,897) Long position 95,533 164,405 Current 69,065 87,643 Non-current 26,468 76,762 Short position (39,383) (20,651) Current (16,538) (5,239) Non-current (22,845) (15,412) Amounts receivable, net 56,150 143,754 (1) Foreign currency swaps (US$ and LIBOR) x CDI (R$98,576) - swap transactions for varying debt repayment dates held to hedge currency risk affecting the Company's loans in US$ (carrying amount R$98,615). (2) Foreign currency swaps (Euro and CDI x Euro) (R$69,218) and (US$ and CDI x US$) (R$236,363) - maturing through February 13, 2019 to hedge currency risk affecting net amounts payable (carrying amount R$69,324 in Euros) and receivables (carrying amount R$239,884 in US$). (3) IPCA x CDI rate swaps (R$40,741) - maturing through 2019 to hedge the same flow as the debentures (4th issue - 3rd series) indexed to the IPCA (carrying amount R$41,121). (4) TJLP x CDI swaps (R$167,070) - maturing through 2019 to hedge the risk of TJLP variation on loan with BNDES (carrying amount R$159,789). (5) IPCA x CDI swaps (R$234,865) - maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA (carrying amount R$233,690). (6) The information of December 31, 2017 refers to the IGPM swap x CDI , swap operations contracted with the purpose of protecting the risk of IGPDI variation in regulatory commitments linked to a 4G license. The commitment of the 4G license was withdrawn from the EAD on January 31, 2018 for R$42,842 (Note 22) and the respective swap operations were finalized on the same date. The table below shows the breakdown of swaps maturing after December 31, 2018: Maturing in Amount receivable (payable) at Swap contract 2022 onwards Foreign currency x CDI 48,465 — — — 48,465 CDI x Foreign Currency (14,418) — — — (14,418) TJLP x CDI 7,737 — — — 7,737 IPCA x CDI 10,742 1,679 1,753 192 14,366 Total 52,526 1,679 1,753 192 56,150 For the purposes of preparing its financial statements, the Company adopted the fair value hedge accounting methodology for its foreign currency swaps x CDI, IPCA x CDI and TJLP x CDI for hedging or financial debt. Under this arrangement, both derivatives and hedged risk are recognized at fair value. The ineffective portion at December 31, 2018 was R$2,449 (R$1,289 at December 31, 2017). At December 31, 2018 and 2017, the transactions with derivatives generated consolidated positive and negative (net) results of R$10,788 and R$41,985, respectively (Note 27). c.2) Sensitivity analysis to the Company’s risk variables CVM Resolution 475/08 requires listed companies to disclose sensitivity analyses for each type of market risk that management understands to be significant when originated by financial instruments to which the entity is exposed at the end of each period, including all derivative financial instrument transactions. In making the above analysis, each of the transactions with derivative financial instruments was assessed and assumptions included a probable scenario and two others that could adversely impact the Company. In the probable scenario the assumption is to use, on the maturity dates of each of the transactions, what the market had been showing through B3 yield curves (currencies and interest rates), as well as data available at IBGE, Central Bank, FGV, among others. In the probable scenario, there is no impact on the fair value of the above-mentioned derivatives. However, for scenarios II and III, as per CVM ruling, risk variables were considered to deteriorate by 25% and 50% respectively. Since the Company only holds derivatives to hedge its foreign currency assets and liabilities, changing scenarios are tracked by the corresponding hedged items, thus showing that the effects are almost non-existent. For these transactions, the Company reported the consolidated net exposure in each of the above-mentioned three scenarios at December 31, 2018. Transaction Risk Probable 25% depreciation 50% depreciation Hedge (long position) Derivatives (depreciation risk EUR) (69,218) (86,522) (103,827) Payables in EUR Debt (appreciation risk EUR) (20,747) (25,934) (31,121) Receivables in EUR Debt (depreciation risk EUR) 88,749 110,936 133,123 Net Exposure (1,216) (1,520) (1,824) Hedge (short position) Derivatives (depreciation risk US$) (234,813) (293,516) (352,219) Payables in US$ Debt (appreciation risk US$) (112,981) (141,227) (169,472) Receivables in US$ Debt (depreciation risk US$) 352,866 441,082 529,299 Net Exposure 5,072 6,339 7,608 Hedge (long position) Derivatives (risk of decrease in IPCA) 273,712 254,731 238,133 Debt in IPCA Debt (risk of increase in IPCA) (353,905) (334,924) (318,326) Net Exposure (80,193) (80,193) (80,193) Hedge (long position) Derivatives (risk of decrease in UMBND) 98,576 98,396 98,217 Debt in UMBND Debt (risk of increase in UMBND) (96,614) (96,644) (96,471) Net Exposure 1,962 1,752 1,746 Hedge (long position) Derivatives (risk of decrease in TJLP) 152,558 151,975 151,402 Debt in TJLP Debt (risk of increase in TJLP) (937,998) (937,390) (936,792) Net Exposure (785,440) (785,415) (785,390) Hedge (CDI position) Hedge US$ and EUR (long position) Derivatives (risk of decrease in CDI) (125,631) (125,695) (125,754) Hedge IPCA (short position) Derivatives (risk of increase in CDI) (273,712) (254,731) (238,133) Hedge UMBND (short position) Derivatives (risk of increase in CDI) (98,576) (98,396) (98,217) Hedge TJLP (short position) Derivatives (risk of increase in CDI) (152,558) (151,975) (151,402) Net Exposure (650,477) (630,797) (613,506) Total net exposure in each scenario (1,510,292) (1,489,834) (1,471,559) Net effect on changes in current fair value — 20,458 38,733 The assumptions used by the Company for the sensitivity analysis at December 31, 2018 were as follows: Risk Variable Probable 25% depreciation 50% depreciation US$ 3.8748 4.8435 5.8122 EUR 4.4370 5.5463 6.6556 IPCA 3.69 % 4.62 % 5.54 % IGPM 7.54 % 9.42 % 11.31 % IGP-DI % % % UMBND 0.0756 0.0946 0.1135 URTJLP 0.0656 0.0820 0.0984 CDI 6.42 % 8.03 % 9.63 % For calculation of the net exposure for the sensitivity analysis, all derivatives were considered at market value and hedged items designated for hedges for accounting purposes were also considered at fair value. The fair values shown in the table above are based on the portfolio position at December 31, 2018, but do not reflect an estimate for realization due to the dynamism of the market, which is constantly monitored by the Company. The use of different assumptions could significantly affect the estimates. d) Fair value The Company and its subsidiaries assessed their financial assets and liabilities in relation to market values using available information and appropriate valuation methodologies. However, both the interpretation of market data and the selection of valuation methods require considerable judgment and reasonable estimates to produce the most adequate realization value. As a result, the estimates shown do not necessarily indicate amounts that could be realized in the current market. The use of different assumptions for the market and/or methodologies may have a material effect on estimated realization values. At December 31, 2018 and 2017, neither the Company not its subsidiaries detected any significant and enduring impairment of their financial instruments. The fair values of all assets and liabilities are classified within the fair value hierarchy described below, based on the lowest level of information that is significant to the fair value measurement as a whole: Level 1: quoted market prices (unadjusted) in active markets for identical assets or liabilities; Level 2: valuation techniques for which there is a significantly lower level of information to measure the fair value directly or indirectly observable; and Level 3: valuation techniques for which the lowest and significant level of information to measure the fair value is not available. During the periods shown in the tables below, there were no transfers between fair value measurements of Level 3 and Levels 1 and 2. e) Classification of financial assets and liabilities by category and fair value hierarchy The tables below present the composition and classification of financial assets and liabilities at December 31, 2018 and 2017, considering the assumptions arising from the adoption of IFRS 9 on January 1, 2018 (Note 2). Fair value Book value Fair value Classification by category hierarchy Financial Assets Current Cash and cash equivalents (Note 3) Amortized cost 3,381,328 4,050,338 3,381,328 4,050,338 Trade accounts receivable (Note 4) Amortized cost 8,304,382 8,588,466 8,304,382 8,588,466 Derivative transactions (Note 31) Measured at fair value through profit or loss Level 2 — 2,480 — 2,480 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 69,065 85,163 69,065 85,163 Non-current Investments pledged as collateral Amortized cost 76,934 81,486 76,934 81,486 Trade accounts receivable (Note 4) Amortized cost 426,252 273,888 426,252 273,888 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 26,468 76,762 26,468 76,762 Total financial assets 12,284,429 13,158,583 12,284,429 13,158,583 Financial Liabilities Current Trade accounts payable, net (Note 16) Amortized cost 7,642,782 7,447,100 7,642,782 7,447,100 Loans, financing and finance lease (Note 20) Amortized cost 1,076,451 1,316,034 1,135,732 1,463,609 Loans, financing and finance lease (Note 20) Measured at fair value through profit or loss Level 2 263,754 304,921 263,754 304,921 Debentures (Note 20) Amortized cost 82,840 1,412,174 237,144 1,532,427 Debentures (Note 20) Measured at fair value through profit or loss Level 2 41,121 312 41,121 312 Derivative transactions (Note 31) Measured at fair value through profit or loss Level 2 16,316 4,504 16,316 4,504 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 222 735 222 735 Non-current Loans, financing and finance lease (Note 20) Amortized cost 817,908 1,353,582 796,481 1,291,974 Loans, financing and finance lease (Note 20) Measured at fair value through profit or loss Level 2 341,728 520,421 341,728 520,421 Contingent consideration (Note 20) Measured at fair value through profit or loss Level 2 465,686 446,144 465,686 446,144 Debentures (Note 20) Amortized cost 3,049,949 3,068,243 2,866,981 2,866,372 Debentures (Note 20) Measured at fair value through profit or loss Level 2 — 40,010 — 40,010 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 22,845 15,412 22,845 15,412 Total financial liabilities 13,821,602 15,929,592 13,830,792 15,933,941 f) Capital management The purpose of the Company's capital management is to ensure maintenance of a high credit rating before institutions and an optimal capital ratio in order to support the Company's business and maximize shareholder value. The Company manages its capital structure by making adjustments and adapting to current economic conditions. For this purpose, the Company may pay dividends, obtain new loans, issue debentures and contract derivatives. For the year ended December 31, 2018, there were no changes in capital structure objectives, policies or processes. In its net debt structure, the Company includes balances referring to loans, financing, debentures, finance leasing, contingent consideration and transactions with derivatives, less cash and cash equivalents, short-term investments to secure BNB financing and guarantor of the contingent consideration liability. The Company’s ratio of consolidated debt to shareholders’ equity consists of the following: Cash and cash equivalents 3,381,328 4,050,338 Loans, financing, debentures, financial lease and contingent consideration (6,139,437) (8,461,841) Derivative transactions, net 56,150 143,754 Short-term investment pledged as collateral 12,473 11,722 Asset guarantor of contingent consideration 465,686 446,144 Net debt 2,223,800 3,809,883 Net equity 71,607,027 69,461,358 Net debt-to-equity ratio 3.11 % 5.48 % g) Risk management policy The Company and its subsidiaries are exposed to several market risks as a result of its commercial operations, debts contracted to finance its activities and debt-related financial instruments. g.1) Currency Risk There is risk arising from the possibility that the Company may incur losses due to fluctuating exchange rates, which add to costs arising from loans denominated in foreign currencies. At December 31, 2018, 1.5% of financial debt was foreign currency denominated (2.7% at December 31, 2017). The Company enters into derivative transactions (currency hedge) with financial institutions to hedge against exchange rate variation affecting its total indebtedness in foreign currency (R$96,615 and R$225,254 at 31 December 2018 and 2017, respectively). Its total debt on these dates was covered by asset positions in currency-exchange hedge transactions with CDI-rate swaps. There is also foreign exchange risk for financial assets and liabilities denominated in foreign currencies, which may generate a smaller amount receivable or larger amount payable depending on the exchange rate in the period. Hedging transactions were engaged to minimize the risks associated with exchange rate variation of financial assets and liabilities in foreign currencies. This balance is subject to daily changes due to the dynamics of the business. However, the Company intends to cover the net balance of these rights and obligations (US$61,909 thousand and €15,624 thousand receivable by December 31, 2018 and US$16,953 thousand and €17,535 thousand receivable by December 31, 2017) to mitigate its foreign exchange risks. g.2) Interest and Inflation Risk This risk arises because the Company may incur losses in the event of an unfavorable change in the domestic interest rate, which may adversely affect financial expenses resulting from the portion of debentures referenced to the CDI and liability positions in derivatives (currency hedge, IPCA and TJLP) pegged to floating interest rates (CDI). The debt with BNDES is indexed to the TJLP which is set on a quarterly basis by the National Monetary Council. In the first quarter of 2017, the TJLP was 7.5%. As of the second quarter of 2017, the TJLP remained at 7.0% up to the end of the year. In the first quarter of 2018, the TJLP was 6.75%, 6.60% in the second quarter of 2018, 6.56% in the third quarter of 2018 and 6.98% in the fourth quarter of 2018. Inflation risk arises from the “Minas Comunica” debentures of the 1st issue, which are tied to the IPCA and thus may adversely affect financial expenses in the event of an unfavorable change in this index. To reduce exposure to |
LEASE
LEASE | 12 Months Ended |
Dec. 31, 2018 | |
LEASE | |
LEASE | 32) LEASE a) Accounting policy The classification of an agreement as a commercial lease is based on substantive issues related to the use of an asset or specific assets, or even the right to use a given asset, on the initial date of its execution. Finance lease agreements : By means of these agreements, the Company assumes substantially all risks and rewards relating to ownership of a leased item. These are capitalized at the lease inception at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Initial direct costs incurred in the transaction are added to cost, where applicable. Payments of finance lease agreements are allocated to financial charges and reduction of finance lease liabilities in order to obtain the constant interest rate on the outstanding liability balance. Implicit interest recognized in liabilities is allocated to the income statement over the lease term using the effective interest rate method. Leased assets are depreciated according to their estimated useful lives or the lease term, whichever is shorter. The Company and its subsidiaries are parties to the following finance lease agreements: As lessee: lease agreements for transmission equipment and media arising from a joint construction agreement with another telecom operator, based on an optical network linked to the power transmission line, interconnecting the northern Brazilian cities to the Company’s national backbone and lease of towers and rooftops (arising from sale and finance leaseback, for which the net carrying amount of the assets upon disposal remained unchanged, a liability was recognized at the present value of minimum lease payments and deferred income was recorded at the difference between the selling price and the mentioned present value (Note 21). As lessor: Lease agreements for IT equipment (“Soluciona TI” product) for which the Company recognizes revenue, upon inception, at the present value of lease payments matched against accounts receivable (Note 4). The difference between the nominal amount of lease payments and recorded accounts receivable/payable are recognized as finance income/expenses using the effective interest method over the lease term. At December 31, 2018, property, plant and equipment and intangible assets included net residual amounts of R$269,076 (R$280,103 as at December 31, 2017), in which the Company is a leaser of financial leasing operations. Operating lease : These are lease agreements where the lessor holds a significant portion of risks and rewards, where effects are recognized in the income statements for the year over the contractual term. |
COMMITMENTS AND GUARANTEES (REN
COMMITMENTS AND GUARANTEES (RENTALS) | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND GUARANTEES (RENTALS) | |
COMMITMENTS AND GUARANTEES (RENTALS) | 33) COMMITMENTS AND GUARANTEES (RENTALS) The Company and its subsidiaries lease equipment, facilities, and several stores, administrative buildings, and sites (containing radio-base stations and towers), through several non-cancellable operating agreements maturing on different dates, with monthly payments. At December 31, 2018, the total amounts corresponding to the full period of the contracts were as follows: Up to 1 year 2,579,046 From 1 to 5 years 7,201,868 Over five years 2,810,647 Total 12,591,561 |
ADDITIONAL INFORMATION ON CASH
ADDITIONAL INFORMATION ON CASH FLOWS | 12 Months Ended |
Dec. 31, 2018 | |
ADDITIONAL INFORMATION ON CASH FLOWS | |
ADDITIONAL INFORMATION ON CASH FLOWS | 34) ADDITIONAL INFORMATION ON CASH FLOWS a) Reconciliation of cash flow financing activities The following is a reconciliation of consolidated cash flow financing activities for the years ended December 31, 2018 and 2017. Cash flows from operating Cash flows from financing activities activities Financing activities not involving cash and cash equivalents Financial Interim and charges and Additions of unclaimed foreign financial lease dividends and Write-offs Write-offs exchange and supplier Business interest on At 12/31/16 Addtions (payments) (payments) variation financing combinations equity At 12/31/17 Interim dividends and interest on equity 2,195,031 — (3,668,551) — — — — 3,869,636 2,396,116 Loans and financing 4,880,606 55,876 (2,449,773) (333,676) 385,021 571,444 — — 3,109,498 Finance lease 374,428 — (35,722) (11,973) 45,265 13,462 — — 385,460 Debentures 3,554,307 3,000,000 (2,000,000) (513,937) 480,369 — — — 4,520,739 Derivative financial instruments (28,377) — (159,408) 2,086 42,334 — (389) — (143,754) Contingent Consideration 414,733 — — — 31,411 — — — 446,144 Total 11,390,728 3,055,876 (8,313,454) (857,500) 984,400 584,906 (389) 3,869,636 10,714,203 At 12/31/17 At 12/31/18 Interim dividends and interest on equity 2,396,116 — (4,136,878) — — — — 5,913,678 4,172,916 Loans and financing 3,109,498 — (1,533,121) (207,708) 231,748 506,397 — — 2,106,814 Finance lease 385,460 — (35,375) (21,231) 45,501 18,672 — — 393,027 Debentures 4,520,739 — (1,324,723) (265,992) 243,886 — — — 3,173,910 Derivative financial instruments (143,754) — 95,993 — 8,389 — — — (56,150) Contingent Consideration 446,144 — — — 19,542 — — — 465,686 Total 10,714,203 — (6,934,104) (494,931) 532,288 525,069 — 5,913,678 10,256,203 b) Financing transactions that do not involve cash The main transactions that do not involve cash of the Company refer to the acquisition of assets through financial leases and income from financing with suppliers, as follows: Financing transactions with suppliers 506,397 571,444 Acquisition of assets through financial leases 18,672 13,462 Total 525,069 584,906 |
ADDITIONAL INFORMATION ON THE C
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 - UNAUDITED | 12 Months Ended |
Dec. 31, 2018 | |
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 - UNAUDITED | |
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 - UNAUDITED | 35) ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 The information for the year ended December 31, 2018 includes the effects of the adoption of IFRS 15. To facilitate the understanding and comparability of information, we present below the consolidated income statement for the years ended December 31, 2018, 2017 and 2016, excluding the effects of adopting IFRS 15. 2018 Income Statements Income Statements Income Statements Income Statements (IFRS 15) IFRS adjustments 15 (IAS 18) (IAS 18) (IAS 18) Net operating revenue (14,750) Cost of sales (21,025,767) — (21,025,767) (20,272,530) (20,823,014) Gross profit 22,436,973 (14,750) 22,422,223 22,934,302 21,685,445 Operating income (expenses) (12,980,789) (71,234) (13,052,023) (16,302,065) (15,317,426) Selling expenses (12,832,741) (71,234) (12,903,975) (13,136,474) (12,455,366) General and administrative expenses (2,598,970) — (2,598,970) (2,443,105) (2,793,386) Other operating income 4,077,003 — 4,077,003 464,182 968,479 Other operating expenses (1,626,081) — (1,626,081) (1,186,668) (1,037,153) Operating income 9,456,184 (85,984) 9,370,200 6,632,237 6,368,019 Financial income 4,112,640 — 4,112,640 1,755,958 2,781,359 Financial expenses (2,285,487) — (2,285,487) (2,659,002) (4,015,900) Equity pickup (5,847) — (5,847) 1,580 1,244 Income before taxes 11,277,490 (85,984) 11,191,506 5,730,773 5,134,722 Income and social contribution taxes (2,349,232) 29,234 (2,319,998) (1,121,983) (1,049,480) Net income for the year 8,928,258 (56,750) 8,871,508 4,608,790 4,085,242 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 36) SUBSEQUENT EVENTS At a meeting held on February 15, 2019, calling upon the General Shareholders’ Meeting to be held in 2020, the Board of Directors approved the payment of interest on equity for the fiscal year 2019, under the terms of article 28 of the Company’s Articles of Incorporation, article 9 of Law No. 9249/95 and CVM Ruling No. 638/12, in the gross amount of R$700,000, equivalent to 0.38875331153 per common share and 0.42762864269 per preferred share, corresponding to a net amount of Withholding Income Tax (IRRF) of R$595,000, equivalent to 0.33044031480 per common share and 0.36348434628 per preferred share, calculated based on the balance sheet of the period. Payment thereof will be made up to the end of fiscal year 2020, on a date to be set by the Board of Directors and timely communicated to the market, being paid individually to shareholders, according to the ownership structure contained in the Company's records, through the end of day February 28, 2019. The Company clarifies that the effective payment of these proceeds is limited to the effective result to be verified in its financial statements, under the terms of the law. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | |
Cash and cash equivalents | These are financial assets classified at amortized cost or measured at fair value through profit or loss maintained in order to meet short-term cash commitments and not for investment or other purposes. The Company and its subsidiaries consider cash equivalents a short-term investment readily convertible into a known amount of cash and subject to insignificant risk of change in value. Short-term investments are classified as cash equivalents when redeemable within 90 days. |
Trade accounts receivable | These are financial assets measured initially at fair value and subsequently, at amortized cost and are evaluated by the value of the services provided in accordance with the contracted conditions, net of estimated impairment losses. These include the services provided to customers, which were still not billed at the balance sheet date, as well as other trade accounts receivable related to the sale of cell phones, SIM cards, accessories, advertising and rent of IT equipment (“Soluciona TI” product). The Company measures the provision for estimated loss for impairment in an amount equal to the loss of credit expected for a lifetime. |
Inventories | These are evaluated and presented at the lower of average acquisition cost and net realizable value, whichever is lower. These include resale materials such as cellphones, SIM cards, prepaid cards, accessories, consumption materials and maintenance. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. Estimated impairment losses are set up for materials and devices considered obsolete or whose carrying amounts are in excess of those usually sold by the Company within a reasonable period. Additions and reversals of estimated impairment losses and inventory obsolescence are included in cost of goods sold (Note 25). |
Prepaid expenses | These are stated at amounts effectively disbursed referring to services contracted but not yet incurred. Prepaid expenses are allocated to the income statements to the extent that related services are rendered, and economic benefits are obtained. |
INCOME AND SOCIAL CONTRIBUTION TAXES | a.1) Current taxes Current tax assets and liabilities are measured at the estimated amount recoverable from, or payable to, the tax authorities. The tax rates and laws used in calculating the amounts referred to above are those in effect, or substantially in effect, at year-end. In the balance sheet, current taxes are presented net of prepayments over the year. Current income and social contribution taxes related to items directly recognized in equity are also recognized in equity. Management regularly assesses the tax position in circumstances in which tax regulation requires interpretation and sets up provision therefore when appropriate. a.2) Deferred taxes Deferred tax assets are recognized for all deductible temporary differences, unused tax credits and losses, to the extent that taxable profit is likely to be available for realization of deductible temporary differences and unused tax credits and losses are likely to be used, except: (i) when the deferred tax asset related to the deductible temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination and does not impact, at the transaction date, the book profit, income or loss for tax purposes; and (ii) on deductible temporary differences related to investments in subsidiaries, where deferred tax assets are recognized only to the extent that it is probable that temporary differences will be reversed in the near future and taxable profit is likely be available so that temporary differences can be used. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit shall be available to allow all or part of the deferred tax asset to be used. Derecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax liabilities are recognized on all temporary tax differences, except: (i) when the deferred tax liability arises from initial recognition of goodwill, or an asset or liability in a transaction other than a business combination, and does not affect book profit or taxable profit or tax losses on the transaction date; and (ii) on temporary tax differences related to investments in subsidiaries, in which the temporary difference reversal period can be controlled and temporary differences are not likely to be reversed in the near future. Deferred tax assets and liabilities are measured at the tax rate expected to be applicable for the year the asset will be realized, or the liability will be settled, based on the rates provided in tax legislation and that were published as at year-end. Deferred tax assets and liabilities are not discounted to present value and are classified in the balance sheet as non-current, irrespective of their expected realization. The tax effects of items recorded directly in equity are also recognized in equity. Deferred tax items are recognized based on the transaction which gave rise to that deferred tax, in comprehensive income or directly in equity. Deferred tax assets and liabilities are presented net when there is a legal or constructive right to offset a tax asset against a tax liability and deferred taxes relate to the same taxpaying entity and are subject to the same tax authority. |
Investments | The consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company ceases to exercise said control. Assets, liabilities and results of a subsidiary acquired or sold during the year are included in the consolidated financial statements from the date on which the Company obtains control until the date on which the Company ceases to exercise control over the subsidiary. Joint control is the contractually agreed sharing of a control, only existing when decisions about relevant activities call for unanimous agreement by the parties sharing control. Control is obtained when the Company is exposed or has the right to variable returns based on its involvement with the investee and has the capacity of affecting those returns through the power exercised over an investee. Based on the equity method, investments are recorded in balance sheets at cost plus changes after the acquisition of the equity interest. The income statement reflects the portion of the results of operations of the investees. When changes are directly recognized in the investees' equity, the Company will recognize its portion in variations occurred, and record these variations in the statements of changes in equity and in the statements of comprehensive income, where applicable. The financial statements of investees are prepared for the same reporting period of the Company. Whenever necessary, adjustments are made so that the accounting policies are in accordance with those adopted by the Company. After the equity method is applied, the Company determines whether there is any need to recognize additional impairment of its investment in investees. At each closing date, the Company determines whether there is objective evidence of impairment of investment in the affiliate. If so, the Company calculates the recoverable amount as the difference between the recoverable value of the investees and their carrying amount and recognizes the amount in the income statements. When there is loss of significant influence over the investees, the Company evaluates and recognizes the investment, at that moment, at fair value. Any difference between the investees’ carrying amount by the time it loses significant influence and the fair value of the remaining investment and revenue from sale is recognized in the income statements. Foreign exchange variations in Aliança’s equity (jointly-controlled entity) are recognized in the Company’s equity in other comprehensive income (“Effects on conversion of investments abroad”, Note 23). |
Property, plant and equipment | It is stated at acquisition and/or construction cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the borrowing costs for long-term construction projects if the recognition criteria are met and is stated net of ICMS (State VAT) credits, which were recorded as recoverable taxes. Asset costs are capitalized until the asset becomes operational. Costs incurred after the asset becomes operational and that do not improve the functionality or extend the useful life of the asset are immediately recognized on an accrual basis. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation. Likewise, expenses that represent asset improvement (expanded installed capacity or useful life) are capitalized. All the other repair and maintenance costs are recognized in the income statement as incurred. The present value of the expected cost for the decommissioning of property, plant and equipment items (towers and equipment on leased property) is capitalized at the cost of the respective asset matched against the provision for dismantling obligations (Note 19) and depreciated over the useful lives of the related assets, which do not exceed the lease term. Depreciation is calculated by the straight-line method over the useful lives of assets at rates that take into account the estimated useful lives of assets based on technical analyses. The assets’ residual values, useful lives and methods of depreciation are reviewed on a yearly basis, adjusted prospectively, if appropriate. Useful lives in terms of depreciation rates are reviewed annually by the Company. Property, plant and equipment items are written off when sold or when no future economic benefit is expected from their use or sale. Any gains or losses arising from write-off of assets (measured as the difference between the net disposal proceeds and the net carrying amount of the asset) are recognized in the income statement in the year in which the asset is written off. |
Intangible assets | Intangible assets acquired separately are measured at cost upon their initial recognition. The cost of an intangible asset acquired in a business combination is its fair value at the acquisition date. After initial recognition, intangible assets are stated at acquisition and/or buildup cost, net of amortization and accumulated provision for impairment, where applicable. Intangible assets generated internally, excluding capitalized development costs, are not capitalized, and the expense is reflected in the income statement for the year in which it is incurred. The useful lives of intangible assets are considered finite or indefinite. Intangible assets with finite useful lives are amortized over their economic useful lives under the straight-line method and are tested for impairment whenever there is any indication of impairment loss. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed on an annual basis. Changes in the estimated useful life or the expected pattern of consumption of future economic benefits embodied in an asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement in the cost/expense category consistent with the function of the intangible assets. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the CGU level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be justifiable. Otherwise, changes in useful life – from indefinite to finite - are carried out prospectively. Goodwill generated upon investment acquisition is treated as an intangible assets with indefinite useful lifes. Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and recognized in the income statement on disposal. |
Goodwill | Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, recorded at fair value on the acquisition date, and the fair value of any non-controlling interest in the acquiree. For each business combination, the Company measures non-controlling interests in the acquiree either at its fair value or on the basis of its proportional share in the identifiable net assets of the acquiree. Costs directly attributable to an acquisition are recorded as expenses, as incurred. Upon acquiring a business, the Company assesses financial assets acquired and liabilities assumed so as to classify and allocate them in accordance with contractual terms, economic circumstances and relevant conditions on the acquisition date, including the segregation, by the acquiree, of embedded derivatives existing in host contracts in the acquiree. In the event a business combination is conducted in stages, the ownership interest previously held in the acquiree’s capital is reassessed at fair value on the date control is acquired, and any impacts are recognized in the income statement. Any contingent portion to be transferred by the acquirer shall be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent portion to be considered as an asset or liability is recognized in the income statement. Contingent consideration on acquisition of a business that is not classified as equity is subsequently measured at fair value through profit or loss, whether or not included in the scope of IFRS 9. Goodwill is initially measured as excess transferred payment amount in relation to acquired net assets (identifiable net assets acquired, and liabilities assumed). If consideration is lower than the fair value of acquired net assets, the difference must be recognized as a gain in the income statement. After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the CGUs that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a CGU and part of the operation within that CGU is disposed of, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is allocated based on the relative fair values of the disposed operation and the portion of the CGU retained. |
Impairment of nonfinancial assets | The Company annually reviews the net carrying amount of assets in order to evaluate events or changes in economic, operating or technological circumstances that may indicate impairment losses. When such evidence is found, and net carrying amount exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net carrying amount to the recoverable amount. The recoverable amount of an asset or a CGU is defined as the higher of value in use and net sales value. Upon estimation of the value in use of an asset or cash-generating unit, estimated future cash flows are discounted at present value using a discount rate Weighted Average Cost of Capital “WACC” which reflects the weighted rate between (i) the cost of capital (including specific risks) based on the Capital Asset Pricing Model; and (ii) the debt these components being applicable to the asset or CGU before taxes. Whenever possible, the net sale value is determined based on a firm sale agreement executed on an arm’s length basis between knowledgeable and willing parties, adjusted by expenses attributable to the sale of assets or, when there is no firm sale agreement, based on the market price of an active market, or on the latest transaction price involving similar assets. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine an asset’s or CGU recoverable amount since the last impairment loss was recognized. Any reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount or exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement. The following assets have specific characteristics for impairment testing: Goodwill: Goodwill is tested for impairment annually at the reporting date or earlier when circumstances indicate that the carrying amount may be impaired. Where the recoverable amount is lower than the carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets: Intangible assets with indefinite useful lives are tested for impairment annually at the reporting date either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying amount may be impaired. Determination of value in use: The key assumptions used to estimate value in use are: (i) revenues (projected considering the growth in customer base, growth in market revenue against GDP and the Company’s share of this market); (ii) variable costs and expenses (projected in accordance with the dynamics of the customer base, and fixed costs are projected in line with the historical performance of the Company, as well as with revenue growth); and (iii) capital investments (estimated considering the technological infrastructure necessary to enable the provision of services). Key assumptions were based on the Company’s historical performance and reasonable macroeconomic assumptions grounded on financial market projections, documented and approved by the Company’s management. |
PROVISIONS AND CONTINGENCIES | Provision is recognized when the Company has a present obligation (legal or constructive) as a result of a past event, when it is probable that economic benefits are required to settle the obligation and a reliable estimate of the value of the obligation can be made. Provision is restated at the balance sheet date considering the likely amount of loss and the nature of each contingency. Provision amounts for contingencies are presented at their gross amount, less the corresponding judicial deposits, and are classified as provision for civil, labor, tax and regulatory contingencies. Judicial deposits are classified as assets given that the conditions required for their net presentation with provision do not exist. Provision for civil, labor, tax and regulatory legal claims The Company and its subsidiaries are parties to administrative, labor, tax, civil and regulatory claims, and accounting provision amounts have been recorded in respect of claims whose likelihood of loss was classified as probable. The assessment of the likelihood of loss includes an analysis of available evidence, the hierarchy of laws, available case law, the latest court decisions law and their relevance in the legal system, as well as the opinion of outside legal counsel. Provision is reviewed and adjusted considering changes in existing circumstances, such as the applicable statute of limitations, tax audit conclusions, or additional exposures identified based on new matters or court decisions. Provision for decommissioning of assets This refers to costs to be incurred due to returning sites to owners (locations intended for tower and equipment installation on leased property) in the same condition as these were found at the time of execution of the initial lease agreement. These costs are provisioned at the present value of amounts expected to settle the obligation using estimated cash flows and are recognized as part of the cost of the corresponding asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to decommissioning of assets. The financial effect of the discount is recorded as incurred and recognized in the income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to, or deducted from, the cost of the asset. Contingent liabilities recognized in a business combination A contingent liability recognized in business combination is initially measured at fair value. This refers to contingent liabilities arising from Purchase Price Allocation generated on acquisition of the controlling interest of Vivo Part. in 2011 and GVTPart. in 2015. |
Loans, financing and debentures | These are financial liabilities measured initially and recognized at fair value, net of costs incurred to obtain them and subsequently measured at amortized cost (plus pro-rata charges and interest), considering the effective interest rate of each operation, or at fair value through profit or loss. They are classified as current unless the Company has the unconditional right to settle the liability for at least 12 months after the closing date of the year. Borrowing costs directly related to the acquisition, construction or production of an asset that necessarily requires more than 18 months to be completed for use or sale purposes are capitalized as part of the cost of the corresponding asset. The Company did not capitalize borrowing and financing costs and debentures due to the absence of qualifying assets. All other costs of loans, financing and debentures are recorded in expense in the period in which they are incurred. The costs of loans, financing and debentures comprise interest and other costs incurred. |
NET OPERATING REVENUE | Recognition of revenues from services and goods With the adoption of IFRS 15 on January 1, 2018, for packages combining various fixed network, mobile, data, internet or television products or services, total revenue is now allocated to each performance obligation based on its independent selling prices in relation to the total consideration of the package and recognized when (or as soon as) the obligation is met, regardless of whether or not items are delivered. When packages include a discount on the equipment, there is an increase in revenues recognized for the sale of handsets and other equipment, to the detriment of ongoing service revenue over subsequent periods. To the extent that the packages are marketed at a discount, the difference between the revenue from the sale of equipment and the consideration received from the customer in advance is recognized as a contractual asset in the statement of financial position. Revenues correspond substantially to the value of the consideration received or receivable arising from the provision of telecommunications, communications, sales of goods, advertising and other revenues, and are presented net of taxes, rebates and returns (in the case of sale of goods), incident on them. Revenues from sales of public telephone cards and prepaid cellular recharge credits, as well as the respective taxes due are deferred and recognized in income as services are effectively rendered. Revenues from leasing contracts for equipment classified as financial leasing ("Soluciona IT" product) are recognized at the installation of the equipment, at which time the actual transfer of risk occurs. Revenues are recognized at the present value of future minimum contract payments. Revenue from the sale of appliances to dealers is accounted for at the time of delivery and not at the time of sale to the final customer. Revenues from services and goods are basically subject to the following indirect taxes: ICMS or ISS (as the case may be), PIS and COFINS, as the case may be. Customer Loyalty Program The Company has a loyalty points program that enables customers to accumulate points when they pay bills regarding the usage of the services offered. The accumulated points may be exchanged for telephone sets or services, conditional upon obtaining a minimum balance of points by the customer. The consideration received is allocated to the cost of sets or services at fair value. The fair value of points is determined by dividing the amount of discount granted by the number of points necessary for the redemption based on the points program. The portion of revenue related to the fair value of the accumulated balance of points generated is deferred and recognized as revenue upon redemption of points. The number of points to be accounted for is determined through statistical techniques that consider assumptions and historical data on expected redemption rates, expiration percentages and cancellation of points, among other factors. |
FINANCIAL INCOME (EXPENSES) | These include interest, and monetary and exchange variations arising from short-term investments, derivative transactions, loans, financing, debentures, present value adjustments of transactions that generate monetary assets and liabilities and other financial transactions. These are recognized on an accrual basis when earned or incurred by the Company. For all financial instruments measured at amortized cost and interest-yielding financial assets classified as financial assets at fair value through other comprehensive income, interest income or expense is recognized using the effective interest method, which exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or liability. |
Share-based payments plans | The Company and subsidiaries measure the cost of transactions settled with shares issued by the parent company (Telefónica), to its officers and employees. The Company and its subsidiaries measure the cost of transactions settled with employees and officers based on shares issued by the parent company (Telefónica), by reference to the fair value of the shares at the date at which they are granted, using the binomial valuation model. This fair value is charged to the income statement over the period until the vesting date. The Company and its subsidiaries reimburse Telefónica for the fair value of the benefit delivered on the grant date to the officers and employees. |
Pension plans and other post-employment benefits | The Company and its subsidiaries individually sponsor pension funds of post-retirement benefits for active and retired employees, in addition to a multisponsor supplementary retirement plan and health care plan for former employees. Contributions are determined on an actuarial basis and recorded on an accrual basis. Liabilities relating to defined benefit plans are determined based on actuarial evaluations at each year-end, in order to ensure that sufficient reserves have been set up for both current and future commitments. Actuarial liabilities related to defined benefit plans were calculated using the projected unit credit method. Actuarial gains and losses are recognized immediately in equity (in other comprehensive income). For plans with defined contribution characteristics, the obligation is limited to the contributions payable, which are recognized in the P&L in the respective accrual periods. The asset or liability related to defined benefit plan to be recognized in the financial statements corresponds to the present value of the obligation for the defined benefit (using a discount rate based on long-term National Treasury Notes - “NTNs”), less the fair value of plan assets that will be used to settle the obligations. Plan assets are assets held by a privately-held supplementary pension plan entity. Plan assets are not available to the Company’s creditors or those of its subsidiaries and cannot be paid directly to the Company or its subsidiaries. The fair value is based on information on market prices and, in the case of securities quoted, on the purchase price disclosed. The value of any defined benefit asset then recognized is limited to the present value of any economic benefits available as a reduction in future plan contribution from the Company. Actuarial costs recognized in the income statement are limited to the service cost and cost of interest on the defined benefit plan obligation. Any changes in the measurement of plan assets and obligations are initially recognized in other comprehensive income, and immediately reclassified to retained earnings in P&L. The Company and its subsidiaries manages and individually sponsors a health care plan for retired employees and former employees with fixed contributions to the plan, in accordance with Law No. 9656/98 (which provides for private health care and health insurance plans). As provided for in Articles 30 and 31 of said law, participants shall have the right to the health care plan in which they participated while they were active employees. |
Financial Instruments - Initial recognition and subsequent measurement | a.1) Financial assets Initial recognition and measurement On initial recognition, a financial asset is classified in the following measurement categories: (i) at fair value through profit or loss; (ii) at amortized cost; or (iii) at fair value through other comprehensive income, depending on the situation. The classification of financial assets according to IFRS 9 is generally based on the business model in which a financial asset is managed and its characteristics of contractual cash flows. The Company’s consolidated financial assets include cash and cash equivalents, trade accounts receivable, short-term investments pledged as collateral and derivative financial instruments. Subsequent measurement Subsequent measurement of financial assets depends on their classification, as follows: Financial assets at fair value through profit or loss : these assets are subsequently measured at fair value. Net income, including interest, is recognized directly in income. Financial assets at amortized cost : these assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in income. Any gain or loss on derecognition is recognized in profit or loss. Financial assets at fair value through other comprehensive income : these assets are subsequently measured at fair value. Interest income is calculated using the effective interest method, and foreign exchange gains and losses and impairment are recognized in profit or loss. Other net income is recognized in other comprehensive income. In derecognition, the accumulated result in other comprehensive income is reclassified to the income statement. Derecognition A financial asset (or, whenever the case, a part of a financial asset, or a part of a group of similar financial assets) is derecognized when: The rights to receive the cash flows from the asset have expired; The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. a.2) Impairment of financial assets The Company and its subsidiaries evaluate, at the balance sheet date, if there is any objective evidence indicating that the financial asset or group of financial assets is not recoverable. A loss only exists if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after initial recognition of the asset (a “loss event” occurred) and such event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reasonably estimated. The carrying amount of an asset is reduced by a provision and the loss amount is recognized in the income statement. If, in a subsequent year, estimated impairment increases or decreases due to an event after impairment recognition, impairment loss previously recognized will be adjusted accordingly. Should a written-off asset be recovered in the future, such recovery is recognized in the income statement. a.3) Financial liabilities Initial recognition and measurement Upon initial recognition, the Company’s financial liabilities are classified in the following categories: financial liabilities measured at fair value through profit or loss and other financial liabilities. Financial liabilities are initially recognized at fair value plus, in the case of loans and financing, transaction cost directly attributable thereto. The Company’s consolidated financial liabilities include trade accounts payable, loans and financing, debentures, finance lease agreements, contingent payments and derivative financial instruments. Subsequent measurement Measurement of financial liabilities depends on their classification, as follows: Financial liabilities at fair value through profit or loss : financial liabilities are designated at initial recognition at fair value through profit or loss. This category also includes derivative financial instruments contracted, except those designated as derivative financial instruments of cash flow hedge. Interest, monetary and exchange variations and changes arising from the valuation at fair value, when applicable, are recognized in the income statement when incurred. Financial liabilities at amortized cost : after initial recognition, loans and financing subject to interest are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement at the time of write-off of liabilities, as well as during the amortization process using the effective interest rate method. Derecognition A financial liability is derecognized when the obligation has been revoked, cancelled or has expired. When an existing financial liability is replaced by another of the same lender, and the terms of the instruments are substantially different, or when the terms of an existing debt instrument are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference in the corresponding carrying amounts is recognized in the income statement. a.4) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Fair value measurement is based on the assumption that the transaction to sell the asset or transfer the liability will take place (i) in the principal market for the asset or liability; or (ii) in the absence of a principal market, in the most advantageous market for that asset or liability. The Company and or its subsidiaries must have access to the principal (or most advantageous) market. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing an asset or liability, assuming that market participants act in their best economic interests. Fair value measurement of a non-financial asset takes into consideration the capacity of a market participant to generate economic benefits through the best use of the asset or selling it to another market participant that would also make the best use of the asset. The Company and its subsidiaries use adequate valuation techniques in the circumstances and for which there is sufficient data to measure the fair value, that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. For assets and liabilities recurrently recognized in the financial statements, the Company determines whether there were transfers between the hierarchy levels, revaluating the classification (based on the lowest level input that is significant to the overall fair value measurement) at the end of each reporting period. For the purposes of fair value disclosures, the Company and its subsidiaries determined classes of assets or liabilities based on the nature, characteristics and risks of those assets or liabilities and the fair value hierarchy level, as mentioned above. a.5) Financial instruments - net Financial assets and liabilities are presented net in the balance sheet if, and only if, there is a current enforceable legal right to offset the amounts recognized and if there is an intention to offset or realize the asset or settle the liability simultaneously. |
Derivative financial instruments and hedge accounting | a.6) Derivative financial instruments and hedge accounting IFRS 9 introduced a new accounting record model for hedges, which is less restrictive, which aligns the accounting treatment with risk management activities by requiring an economic relationship between the hedged item and the hedging instrument and that the coverage ratio is the same as the entity applies to its risk management. With this new model, the documentation criteria for hedging relationships are modified and improvements are included in the disclosures about hedging activities. The Company uses derivative financial instruments, such as currency and interest rate swaps or currency non- deliverable forward contracts to hedge against currency risks. Derivative financial instruments designated in hedge transactions are initially recognized at fair value on the date on which the derivative contract is entered into, and subsequently revalued also at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive and as financial liabilities when the fair value of the instrument is negative. Any gains or losses resulting from changes in fair value of derivatives during the year are posted directly to the income statement, except for the effective portion of cash flow hedges, which is recognized directly in equity as other comprehensive income and subsequently reclassified to P&L when the hedged item affects P&L. On the inception initial recognition of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk, the nature of unhedged risks, the prospective statement of hedge effectiveness and how the Company shall assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. For the purpose of hedge accounting, hedges are classified as cash flow hedges and fair value hedges. Cash flow hedges Cash flow hedges meeting the recording criteria are accounted for as follows: (i) the portion of gain or loss from the hedge instrument determined as an effective hedge shall be recognized directly in equity (other comprehensive income), and (ii) the ineffective portion of gain or loss from the hedge instrument shall be recognized in the income statement. When the Company’s documented risk management strategy for any given hedge relationship excludes from the hedge effectiveness evaluation any particular component of gain or loss or the corresponding cash flows from the hedge instrument, that gain or loss component is recognized in financial income (expenses). Amounts recorded in other comprehensive income are immediately transferred to the income statement when the hedged transaction affects P&L. When a hedged item is the cost of a non-financial asset or liability, amounts recorded in equity are transferred at the initial carrying amount of the non-financial assets and liabilities. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge fails to meet the hedge accounting criteria, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs or the firm commitment is fulfilled. The Company's contracts are classified as cash flow hedges when they provide protection against changes in cash flows that are attributable to a particular risk associated with a recognized liability that may affect the profit or loss and fair value when they provide protection against exposure to changes in the fair value of the identified part of certain liabilities that is attributable to a particular risk (exchange variation) and may affect the profit or loss. Fair value hedges Fair value hedges meeting the accounting criteria are accounted for as follows: (i) gain or loss from changes in fair value of a hedge instrument shall be recognized in the income statement as finance costs; and (ii) gain or loss from a hedged item attributable to the hedged risk shall adjust the recorded amount of the hedged item to be recognized in the income statement, as finance costs. For fair value hedges relating to items carried at amortized cost, any adjustment to carrying amount is amortized through profit or loss over the remaining term of the hedge using the effective interest method. The effective interest rate amortization may begin as soon as any adjustment exists and no later than the point that the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in the income statement. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss. Classification between current and non-current Derivative financial instruments are classified as current and non-current or segregated into short and long-term portions based on an evaluation of the contractual cash flows. When the Company maintains a derivative as an economic hedge (and does not apply hedge accounting), for a period exceeding 12 months after the balance sheet date, the derivative is classified as non-current (or segregated into current and non-current portions), in line with the classification of the corresponding item. Derivative instruments that are designated as effective hedging instruments are classified consistently with the classification of the underlying hedged item. The derivative instrument is segregated into current and non-current portions only when amounts can be reliably allocated. |
Lease | The classification of an agreement as a commercial lease is based on substantive issues related to the use of an asset or specific assets, or even the right to use a given asset, on the initial date of its execution. Finance lease agreements : By means of these agreements, the Company assumes substantially all risks and rewards relating to ownership of a leased item. These are capitalized at the lease inception at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Initial direct costs incurred in the transaction are added to cost, where applicable. Payments of finance lease agreements are allocated to financial charges and reduction of finance lease liabilities in order to obtain the constant interest rate on the outstanding liability balance. Implicit interest recognized in liabilities is allocated to the income statement over the lease term using the effective interest rate method. Leased assets are depreciated according to their estimated useful lives or the lease term, whichever is shorter. The Company and its subsidiaries are parties to the following finance lease agreements: As lessee: lease agreements for transmission equipment and media arising from a joint construction agreement with another telecom operator, based on an optical network linked to the power transmission line, interconnecting the northern Brazilian cities to the Company’s national backbone and lease of towers and rooftops (arising from sale and finance leaseback, for which the net carrying amount of the assets upon disposal remained unchanged, a liability was recognized at the present value of minimum lease payments and deferred income was recorded at the difference between the selling price and the mentioned present value (Note 21). As lessor: Lease agreements for IT equipment (“Soluciona TI” product) for which the Company recognizes revenue, upon inception, at the present value of lease payments matched against accounts receivable (Note 4). The difference between the nominal amount of lease payments and recorded accounts receivable/payable are recognized as finance income/expenses using the effective interest method over the lease term. At December 31, 2018, property, plant and equipment and intangible assets included net residual amounts of R$269,076 (R$280,103 as at December 31, 2017), in which the Company is a leaser of financial leasing operations. Operating lease : These are lease agreements where the lessor holds a significant portion of risks and rewards, where effects are recognized in the income statements for the year over the contractual term. |
OPERATIONS (Tables)
OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OPERATIONS | |
Summary of authorizations for rendering SMP services | Radiofrequency Band (MHz) License Expiration (Year) 450 MHz 14 2027 700 MHz 20 2029 800 MHz 25 2020-2028 900 MHz 5 2020-2023 1800 MHz 20-50 2020-2023 2100 MHz 20-30 2023 2500 MHz 40-60 2027-2031 |
BASIS OF PREPARATION AND PRES_2
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS | |
Schedule of equity interests | Equity interests Investees Type of investment At 12.31.18 At 12.31.17 Country (Headquarters) Core activity Telefônica Data S.A. ("TData") Subsidiary — 100.00 % Brazil Telecommunications Terra Networks Brasil S.A. ("Terra Networks") Subsidiary 100.00 % — Brazil Telecommunications Telefônica Transportes e Logística Ltda ("TGLog") Subsidiary 99.99 % — Brazil Transports and logistics POP Internet Ltda ("POP") Subsidiary 99.99 % 99.99 % Brazil Internet Aliança Atlântica Holding B.V. ("Aliança") Joint venture 50.00 % 50.00 % Brazil Holding of the telecommunications sector Companhia AIX de Participações ("AIX") Joint venture 50.00 % 50.00 % Holland Operation of underground telecommunications networks Companhia ACT de Participações ("ACT") Joint venture 50.00 % 50.00 % Brazil Technical assistance in telecommunication networks |
Schedule of amendments adopted | Standards and amendments IFRS 9 Financial Instruments IFRS15 Revenue from Contracts with Customers Clarifications to IFRS 15 Revenue from Contracts with Customers , issued on April 12, 2016 Amendments to IFRS 2 Classication and Valuation of Share Based Transactions Improvements to IFRS Standards 2014-2016 Cycle |
Schedule of classification and measurement of financial assets and liabilities | Classification by category Classification in accordance with IAS 39 Classification in accordance with IFRS 9 Financial Assets Trade accounts receivable Loans and receivables Amortized cost Derivative transactions Hedges (economic) Measured at fair value through comprehensive income Financial Liabilities Derivative transactions Hedges (economic) Measured at fair value through comprehensive income |
Schedule of changes in contractual assets, liabilities and incremental costs | Contract assets (1) Contract assets, Provision Contract Contractual Incremental gross for losses assets, net liabilities (3) costs (2) Initial adoption on 01.01.18 (33,196) (178,897) Reclassification on 01.01.18 (Note 21) — — — (383,688) — Additions 587,733 (512) 587,221 (7,271,614) 262,518 Write-offs, net (585,675) — (585,675) 7,301,992 (190,772) Balances as of 12.31.18 195,733 (33,708) 162,025 (532,207) 255,391 Current 195,733 (33,708) 162,025 (504,473) 170,703 Non-current — — — (27,734) 84,688 The amounts in the above table are classified in the balance sheets as follows: (1) Accounts receivable (Note 4); (2) Prepaid expenses (Note 6); and (3) Deferred income (Note 21). The amounts of additions and write-offs of the above table refers mainly to the |
Schedule of expected periods of realization of contractual liabilities | Year 2019 (504,473) 2020 (16,753) 2021 (2,383) 2022 onwards (8,598) Total (532,207) |
Schedule of IFRS amendments | Mandatory application: annual periods Standards and amendments beginning on or after Improvements to IFRS Standards 2015-2017 Cycle January 1, 2019 IFRS 16 Leases January 1, 2019 IFRIC23 Uncertainty over Income Tax Treatments January 1, 2019 Amendments to IFRS 9 Prepayment Features with Negative Compensation January 1, 2019 Amendments to IAS 28 Long-term Interest in associates and Joint Ventures January 1, 2019 Amendments to IFRS 10 and IAS 28 Sale or Constituition of Assets between an Investidor and its Associate or Joint Venture January 1, 2019 |
CASH AND CASH EQUIVALENTS (Tabl
CASH AND CASH EQUIVALENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
CASH AND CASH EQUIVALENTS | |
Schedule of cash and cash equivalents | Cash and banks 205,598 117,799 Short-term investments 3,175,730 3,932,539 Total 3,381,328 4,050,338 |
TRADE ACCOUNTS RECEIVABLE (Tabl
TRADE ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
TRADE ACCOUNTS RECEIVABLE | |
Schedule of trade accounts receivables | Billed amounts 6,789,257 6,753,621 Unbilled amounts 2,454,810 2,481,364 Interconnection amounts 835,887 859,819 Amounts from related parties (Note 28) 148,814 201,021 Gross accounts receivable 10,228,768 10,295,825 Estimated impairment losses (1,498,134) (1,433,471) Total 8,730,634 8,862,354 Current 8,304,382 8,588,466 Non-current 426,252 273,888 |
Schedule of accounts receivable balances related to the Soluciona IT | Nominal amount receivable 573,094 434,743 Deferred financial income (53,424) (33,614) Present value of accounts receivable 519,670 401,129 Estimated impairment losses (196,435) (154,666) Net amount receivable 323,235 246,463 Current 151,396 140,257 Non-current 171,839 106,206 |
Schedule of aging list of gross trade accounts receivable | Present value of accounts Nominal amount receivable receivable Falling due within one year 279,563 267,595 Falling due between one year and five years 293,531 252,075 Total 573,094 519,670 |
Schedule of amounts receivable, net of estimated losses for impairment of accounts receivable, by maturity | Falling due 6,485,154 6,635,125 Overdue – 1 to 30 days 1,096,639 1,132,008 Overdue – 31 to 60 days 305,019 375,176 Overdue – 61 to 90 days 200,401 232,648 Overdue – 91 to 120 days 220,221 105,342 Overdue – over 120 days 423,200 382,055 Total 8,730,634 8,862,354 |
Schedule of changes in the estimated impairment losses for accounts receivable | Balance at 12/31/16 (1,399,895) Supplement to estimated losses, net of resersal (Note 25) (1,481,015) Write-off due to use 1,456,158 Business combinations (Note 1.c.2) (8,719) Balance at 12/31/17 (1,433,471) Initial adoption IFRS 9 on 01.01.18 (364,456) Supplement to estimated losses, net of resersal (Note 25) (1,533,660) Write-off due to use 1,833,453 Balance at 12/31/18 (1,498,134) |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INVENTORIES | |
Schedule of inventories | Materials for resale 413,843 325,850 Materials for consumption 61,819 57,740 Other inventories 30,013 7,822 Gross total 505,675 391,412 Estimated losses from impairment or obsolescence (43,622) (42,657) Total 462,053 348,755 |
PREPAID EXPENSES (Tables)
PREPAID EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PREPAID EXPENSES | |
Schedule of prepaid expenses | Advertising and publicity 252,900 336,295 Insurance 24,867 36,941 Rental 32,792 29,713 Software and networks maintenance 17,485 12,375 Incremental costs - IFRS 15 (Note 2.f) 255,391 — Financial charges 43,853 2,592 Personal 33,970 28,178 Taxes and other 54,717 23,461 Total 715,975 469,555 Current 581,743 446,439 Non-current 134,232 23,116 |
DEFERRED TAXES AND TAXES RECOVE
DEFERRED TAXES AND TAXES RECOVERABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |
Schedule of income and social contribution taxes recoverable | Income taxes recoverable 245,883 428,524 Social contribution taxes recoverable 28,706 77,011 Total 274,589 505,535 |
Schedule of income and social contribution taxes payable | Income taxes payable 8,756 3,267 Social contribution taxes payable 3,253 1,212 Total 12,009 4,479 |
Schedule of significant components of deferred income and social contribution taxes | Effects of the initial Business adoption of Balances at Income Comprehensive combination Balances at Income Comprehensive IFRS 9 and Balances at 12/31/16 statement income (Note 1 c.2) Other 12/31/17 statement income IFRS 15 12/31/18 Deferred tax assets (liabilities) Income and social contribution taxes on tax losses (1) 14,071 710,411 — 69,451 — 793,933 634,543 — — 1,428,476 Income and social contribution taxes on temporary differences (2) 13,426 (1,251,816) 58,192 48,434 (86) (1,131,850) (2,151,290) 31,797 70,012 (3,181,331) Provisions for legal, labor, tax civil and regulatory contingencies 2,230,336 68,399 — — — 2,298,735 (333,035) — — 1,965,700 Trade accounts payable and other provisions 677,123 (25,706) — — — 651,417 (79,683) — — 571,734 Estimated losses on impairment of accounts receivable 358,805 76,155 — — — 434,960 (115,661) — 122,977 442,276 Customer portfolio and trademarks 313,092 (58,674) — — — 254,418 (69,815) — — 184,603 Estimated losses from modems and other P&E items 284,677 (83,736) — — — 200,941 (24,811) — — 176,130 Pension plans and other post-employment benefits 108,419 8,630 57,485 — — 174,534 20,934 30,753 — 226,221 Profit sharing 125,256 (15,210) — — — 110,046 19,643 — — 129,689 Provision for loyalty program 19,112 (1,991) — — — 17,121 1,031 — — 18,152 Accelerated accounting depreciation 24,033 (15,773) — — — 8,260 (7,873) — — 387 Estimated impairment losses on inventories 12,099 (347) — — — 11,752 (2,481) — — 9,271 Derivative transactions 60,133 (35,084) 822 — — 25,871 78,028 832 — 104,731 Licenses (1,420,556) (216,330) — — — (1,636,886) (216,328) — — (1,853,214) Goodwill (Spanish and Navytree, Vivo Part. and GVTPart.) (2,729,203) (868,969) — — — (3,598,172) (1,002,768) — — (4,600,940) Property, plant and equipment of small value — — — — — — (395,606) — — (395,606) Technological Innovation Law (140,940) 43,407 — — — (97,533) 47,406 — — (50,127) Other temporary differences (3) 91,040 (126,587) (115) 48,434 (86) 12,686 (70,271) 212 (52,965) (110,338) Total deferred tax assets (liabilities), noncurrent 27,497 (541,405) 58,192 117,885 (86) (337,917) (1,516,747) 31,797 70,012 (1,752,855) Deferred tax assets 4,541,952 5,288,176 5,569,885 Deferred tax liabilities (4,514,455) (5,626,093) (7,322,740) Deferred tax assets (liabilities), net 27,497 (337,917) (1,752,855) Represented in the balance sheet as follows: Deferred tax assets 27,497 371,408 230,097 Deferred tax liabilities — (709,325) (1,982,952) (1) This refers to the amounts recorded which, in accordance with Brazilian tax legislation, may be offset to the limit of 30% of the tax bases computed for the following years, with no expiry date. (2) This refers to amounts that will be realized upon payment of provision, occurrence of impairment losses for trade accounts receivable, or realization of inventories, as well as upon reversal of other provision. (3) These refer to deferred taxes arising from other temporary differences, such as deferred income, renewal of licenses, and subsidy on the sale of mobile phones, among others. |
Schedule of expected realization of deferred taxes | Year 2019 2,082,829 2020 555,161 2021 494,257 2022 1,002,778 2023 259,562 2024 onwards (6,147,442) Total (1,752,855) |
Schedule of reconciliation of income and social contribution tax expense | Income before taxes 11,277,490 5,730,773 5,134,722 Income and social contribution tax expenses, at the tax rate of 34% (3,834,347) (1,948,463) (1,745,805) Permanent differences Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 11) (1,988) 537 423 Unclaimed interest on equity (14,426) (21,843) (11,432) Temporary differences in subsidiaries — 2,007 — Non-deductible expenses, gifts, incentives (76,671) (94,413) (88,916) Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years — 132,080 — Tax benefit related to interest on equity allocated 1,547,000 821,657 738,529 Other (additions) exclusions 31,200 (13,545) 57,721 Tax debits (2,349,232) (1,121,983) (1,049,480) Effective rate 20.8 % 19.6 % 20.4 % Current income and social contribution taxes (832,485) (580,578) (288,063) Deferred income and social contribution taxes (1,516,747) (541,405) (761,417) |
TAXES, CHARGES AND CONTRIBUTI_3
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | |
Schedule of taxes, charges and contributions recoverable | State VAT (ICMS) (1) 2,549,006 2,450,856 Withholding taxes and contributions (2) 129,741 238,355 PIS and COFINS (3) 5,000,677 85,098 Fistel, INSS, ISS and other taxes 217,056 27,431 Total 7,896,480 2,801,740 Current 4,674,218 2,058,455 Non-current 3,222,262 743,285 (1) This includes credits of ICMS arising from the acquisition of property and equipment, subject to offsetting in 48 months; requests for refund of ICMS, which was paid under invoices that were cancelled subsequently; for the rendering of services; tax substitution; and tax rate difference; among others. Non-current consolidated amounts include credits arising from the acquisition of property and equipment of R$509,920 and R$423,588 on December 31, 2018 and 2017, respectively. (2) This refers to credits on withholding income tax (“IRRF”) on short-term investments, interest on equity and others, which are used as deduction in operations for the period and social contribution tax withheld at source on services provided to public agencies. (3) The balance of December 31, 2018 include the tax credits of PIS and COFINS monetarily restated by SELIC, in the amounts of R$4,915,239, arising from the final judicial processes on May 17, 2018 and August 28, 2018, in favor of the Company and its subsidiary, which recognized the right to deduct ICMS from the basis of calculation of PIS and COFINS contributions for the periods from September 2003 to June 2017 and July 2004 to July 2013, respectively (see Notes 26 and 27). As at December 31, 2018, current and non-current balances were R$2,520,990 and R$2,394,249, respectively. The Internal Revenue Service filed a review, pursuant to Law 13,670/18, with the purpose of approving the PIS and COFINS credits resulting from the dispute that dealt with the exclusion of ICMS from the bases of these contributions. The Company has made every effort, including judicial measures, to meet in a timely manner the requests of this audit procedure and thus continue compensating its referred tax credits. The Company has three other lawsuits of the same nature in progress (including lawsuits of companies that have already been merged - GVT and Telemig), which are considered as contingent assets, which cover several periods between December 2001 and June 2017, whose ranges of values we estimate between R$1,700 million to R$2,200 million. |
JUDICIAL DEPOSITS AND GARNISH_2
JUDICIAL DEPOSITS AND GARNISHMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
JUDICIAL DEPOSITS AND GARNISHMENTS | |
Schedule of judicial deposits and garnishments | Judicial deposits Tax 1,929,594 4,230,917 Labor 522,201 885,338 Civil 1,164,835 1,205,807 Regulatory 208,447 200,627 Total 3,825,077 6,522,689 Garnishments 84,937 141,116 Total 3,910,014 6,663,805 Current 313,007 324,638 Non-current 3,597,007 6,339,167 |
Schedule of composition of the balances of the tax judicial deposits | 12.31.18 12.31.17 Contribution to Empresa Brasil de Comunicação (EBC) — 1,238,068 Telecommunications Inspection Fund (FISTEL) 44,771 1,161,061 Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL) 551,937 518,474 Universal Telecommunication Services Fund (FUST) 503,246 484,649 Social Contribution Tax for Intervention in the Economic Order (CIDE) 278,685 270,612 State Value-Added Tax (ICMS) 239,220 273,264 Social Security, work accident insurance (SAT) and funds to third parties (INSS) 141,759 134,688 Withholding Income Tax (IRRF) 55,425 45,846 Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS) 39,672 37,965 Other taxes, charges and contributions 74,879 66,290 Total 1,929,594 4,230,917 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER ASSETS | |
Schedule of other assets | Advances to employees and suppliers 83,094 58,456 Related-party receivables (Note 28) 120,776 166,733 Receivables from suppliers 114,175 114,015 Surplus from post-employment benefit plans (Note 30) 10,997 9,833 Other amounts receivable 20,670 61,295 Total 349,712 410,332 Current 302,607 321,397 Non-current 47,105 88,935 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INVESTMENTS | |
Summary of the relevant financial data of the investees in which the Company holds a stake | Joint Ventures (Aliança / AIX / ACT) 12/31/18 12/31/17 Equity interest 50.00 % 50.00 % Summary of balance sheets: Current assets 213,481 189,988 Non-current assets 12,327 13,410 Total assets 225,808 203,398 Current liabilities 7,103 4,143 Non-current liabilities 16,101 4,811 Equity 202,604 194,444 Total liabilities and equity 225,808 203,398 Investment Book value 101,302 97,222 Joint Ventures (Aliança / AIX / ACT) Summary of Income Statements: Aliança / AIX / ACT Aliança / AIX / ACT Aliança / AIX / ACT Net operating income 45,608 45,704 42,919 Operating costs and expenses (58,773) (43,571) (41,987) Financial income (expenses), net 1,334 1,713 2,021 Income and social contribution taxes 137 (686) (465) Net income (loss) for the year (11,694) 3,160 2,488 Equity pickup, according to interest held (5,847) 1,580 1,244 |
Schedule of changes in investments | Other Total Joint ventures investments (1) investments Balances at 12/31/16 84,403 1,342 85,745 Equity pick-up 1,580 — 1,580 Other comprehensive income 11,239 338 11,577 Balances at 12/31/17 97,222 1,680 98,902 Equity pick-up (5,847) — (5,847) Provision for losses on investments — (700) (700) Other comprehensive income 9,927 (625) 9,302 Balances at 12/31/18 101,302 355 101,657 (1) |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of breakdown of and changes to property, plant and equipment | Assets and Switching and Terminal facilities transmission equipment / Estimated under equipment modems Infrastructure Land Other P&E losses (1) construction Total Annual depreciation rate(%) 2.50 to 25.00 6.67 to 66.67 2.50 to 66.67 10.00 to 25.00 Balances and changes: Balance at 12/31/16 22,231,874 2,588,307 3,725,207 315,719 819,356 (485,575) 2,730,030 31,924,918 Additions 42,999 141,132 91,160 550 259,620 (37,374) 6,085,487 6,583,574 Write-offs, net (88,766) (7,602) (6,966) (1,916) (2,522) 162,319 (18,897) 35,650 Net transfers 3,634,293 1,471,431 619,008 — 34,093 132,578 (5,910,612) (19,209) Depreciation (Note 25) (3,011,291) (1,468,936) (544,454) — (284,983) — — (5,309,664) Business Combination (Note 1.c.2) — — 1,342 — 4,888 — 817 7,047 Balance at 12/31/17 22,809,109 2,724,332 3,885,297 314,353 830,452 (228,052) 2,886,825 33,222,316 Additions 10,670 129,640 101,798 550 204,041 (8,975) 6,527,074 6,964,798 Write-offs, net (45,719) (1,721) (8,461) (71) (2,926) 80,135 (61,430) (40,193) Net transfers 5,380,744 1,098,380 449,369 — 124,772 — (7,239,573) (186,308) Depreciation (Note 25) (3,486,592) (1,379,547) (658,915) — (320,232) — — (5,845,286) Balance at 12/31/18 24,668,212 2,571,084 3,769,088 314,832 836,107 (156,892) 2,112,896 34,115,327 At 12.31.17 Cost 74,100,056 16,845,903 15,728,808 314,353 4,687,395 (228,052) 2,886,825 114,335,288 Accumulated depreciation (51,290,947) (14,121,571) (11,843,511) — (3,856,943) — — (81,112,972) Total 22,809,109 2,724,332 3,885,297 314,353 830,452 (228,052) 2,886,825 33,222,316 At 12.31.18 Cost 79,002,102 18,033,246 16,154,562 314,832 4,996,170 (156,892) 2,112,896 120,456,916 Accumulated depreciation (54,333,890) (15,462,162) (12,385,474) — (4,160,063) — — (86,341,589) Total 24,668,212 2,571,084 3,769,088 314,832 836,107 (156,892) 2,112,896 34,115,327 (1) |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS | |
Schedule of breakdown, changes and amortization rates of intangible assets | Indefinite useful life Finite useful life Estimated Other losses Software Customer intangible for under Goodwill Software portfolio Trademarks Licenses assets software development Total Annual amortization rate (%) 20.00 to 50.00 11.76 to 12.85 5.13 to 66.67 3.60 to 6.67 6.67 to 20.00 Balances and changes: Balance at 12/31/16 23,062,421 2,694,521 2,561,220 1,157,820 14,897,968 50,702 (4,581) 63,425 44,483,496 Additions — 276,390 — — — 207 — 1,100,785 1,377,382 Write-offs, net — (7,427) — — — — 4,051 — (3,376) Net transfers — 701,545 — — — (24,297) 31 (658,070) 19,209 Amortization (Note 25) — (944,753) (582,357) (84,205) (928,362) (5,660) — — (2,545,337) Business Combination (Note 1.c.2) — 530 — — — — — — 530 Balance at 12/31/17 23,062,421 2,720,806 1,978,863 1,073,615 13,969,606 20,952 (499) 506,140 43,331,904 Additions — 970,172 — — 6,647 — — 249,307 1,226,126 Write-offs, net — (16) — — — — — — (16) Net transfers — 519,539 — — — 32,539 — (365,770) 186,308 Amortization (Note 25) — (965,459) (549,589) (84,205) (920,116) (3,968) — — (2,523,337) Balance at 12/31/18 23,062,421 3,245,042 1,429,274 989,410 13,056,137 49,523 (499) 389,677 42,220,985 At 12/31/17 Cost 23,062,421 15,125,532 4,513,278 1,658,897 20,237,572 238,201 (499) 506,140 65,341,542 Accumulated amortization — (12,404,726) (2,534,415) (585,282) (6,267,966) (217,249) — — (22,009,638) Total 23,062,421 2,720,806 1,978,863 1,073,615 13,969,606 20,952 (499) 506,140 43,331,904 At 12/31/18 Cost 23,062,421 16,604,769 4,513,278 1,658,897 20,244,219 270,741 (499) 389,677 66,743,503 Accumulated amortization — (13,359,727) (3,084,004) (669,487) (7,188,082) (221,218) — — (24,522,518) Total 23,062,421 3,245,042 1,429,274 989,410 13,056,137 49,523 (499) 389,677 42,220,985 |
Schedule of breakdown of goodwill | Ajato Telecomunicação Ltda. 149 Spanish and Figueira, by the merger of Telefônica Data Brasil Holding (TDBH) in 2006 212,058 Santo Genovese Participações, Atrium Telecomunicações, which took place in 2004 71,892 Telefônica Televisão Participações, former Navytree, occurred in 2008 780,693 Vivo Participações, occurred in 2011 9,160,488 GVT Participações, occurred in 2015 12,837,141 Total 23,062,421 |
IMPAIRMENT OF NONFINANCIAL AS_2
IMPAIRMENT OF NONFINANCIAL ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
IMPAIRMENT OF NONFINANCIAL ASSETS | |
Schedule of sensitivity to changes in assumptions | Changes in key assumptions In percentage points (p.p) Financial variables Discount rate +/- Perpetuity growth rates +/- Operating variables OIBDA Margin +/- Capex/Revenues Margin +/- |
PERSONNEL, SOCIAL CHARGES AND_2
PERSONNEL, SOCIAL CHARGES AND BENEFITS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PERSONNEL, SOCIAL CHARGES AND BENEFITS | |
Schedule of personnel, social charges and benefits | Salaries and wages 34,767 40,171 Social charges and benefits 385,695 399,229 Profit sharing 265,433 273,384 Share-based payment plans (Note 29) 22,638 33,880 Other compensation 86,000 — Total 794,533 746,664 Current 782,630 723,380 Non-current 11,903 23,284 |
TRADE ACCOUNTS PAYABLE (Tables)
TRADE ACCOUNTS PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
TRADE ACCOUNTS PAYABLE | |
Schedule of trade accounts payable | Sundry suppliers (Opex, Capex, Services and Material) 6,790,882 6,683,503 Amounts payable (operators, cobilling) 198,942 187,976 Interconnection / interlink (1) 269,446 224,777 Related parties (Note 28) 383,512 350,844 Total 7,642,782 7,447,100 |
TAXES, CHARGES AND CONTRIBUTI_4
TAXES, CHARGES AND CONTRIBUTIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
TAXES, CHARGES AND CONTRIBUTIONS | |
Schedule of taxes, charges and contributions | ICMS 1,094,769 1,149,137 PIS and COFINS 512,714 419,589 Fust and Funttel 89,794 93,869 ISS, CIDE and other taxes 139,933 113,689 Total 1,837,210 1,776,284 Current 1,797,965 1,726,836 Non-current 39,245 49,448 |
DIVIDENDS AND INTEREST ON EQU_2
DIVIDENDS AND INTEREST ON EQUITY (IOE) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DIVIDENDS AND INTEREST ON EQUITY (IOE) | |
Schedule of breakdown of dividend and interest on equity | Telefónica Latinoamérica Holding 952,217 505,750 Telefónica 1,146,619 609,003 SP Telecomunicações Participações 722,862 383,933 Telefónica Chile 2,015 1,070 Non-controlling interest 1,349,203 896,360 Total 4,172,916 2,396,116 |
Schedule of changes in dividend and interest on equity | Balance at 12/31/16 2,195,031 Supplementary dividends for 2016 1,913,987 Interim interest on equity (net of IRRF) 2,054,143 Unclaimed dividends and interest on equity (101,778) Payment of dividends and interest on equity (3,668,551) IRRF on shareholders exempt/immune from interest on equity 3,284 Balance at 12/31/17 2,396,116 Supplementary dividends for 2017 2,191,864 Interim interest on equity (net of IRRF) 3,867,500 Unclaimed dividends and interest on equity (152,770) Payment of dividends and interest on equity (4,136,878) IRRF on shareholders exempt/immune from interest on equity 7,084 Balance at 12/31/18 4,172,916 |
PROVISIONS AND CONTINGENCIES (T
PROVISIONS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PROVISIONS AND CONTINGENCIES | |
Schedule of breakdown of changes in provisions for cases in which an unfavorable outcome is probable, in addition to contingent liabilities and provisions for dismantling | Provisions for contingencies Contingent Provision for Labor Tax Civil Regulatory liabilities (PPA) decommissioning Total Balances at 12/31/16 1,382,957 3,129,681 1,039,357 828,934 881,745 546,587 7,809,261 Additions (reversal), net (Note 26) 297,171 154,441 438,693 198,344 (89,230) — 999,419 Other additions (reversal) (2) (492) 93,596 207 — — 20,765 114,076 Write-offs due to payment (865,656) (168,407) (551,928) (6,873) — — (1,592,864) Write-offs due to taxes (1) — (66,027) — — — — (66,027) Monetary restatement 147,334 348,393 123,487 83,387 53,281 12,129 768,011 Business combination (Note 1 c.2) 19,282 87,531 6,061 — — — 112,874 Balances at 12/31/17 980,596 3,579,208 1,055,877 1,103,792 845,796 579,481 8,144,750 Additions (reversal), net (Note 26) 319,056 452,746 395,631 (41,837) (27,345) — 1,098,251 Other additions (reversal) (2) (99,372) (2,443,047) (14,119) — — 16,752 (2,539,786) Write-offs due to payment (541,749) (51,924) (598,294) (117,599) — — (1,309,566) Monetary restatement 121,155 414,914 165,708 77,860 8,824 77,215 865,676 Balances at 12/31/18 779,686 1,951,897 1,004,803 1,022,216 827,275 673,448 6,259,325 At 12/31/17 Current 239,229 — 201,673 994,009 — — 1,434,911 Non-current 741,367 3,579,208 854,204 109,783 845,796 579,481 6,709,839 At 12/31/18 Current 245,805 — 132,124 — — — 377,929 Non-current 533,881 1,951,897 872,679 1,022,216 827,275 673,448 5,881,396 (1) (2) |
Schedule of guarantees granted by contingency | 12.31.18 12.31.17 Judicial deposits Judicial deposits Property and and Letters of Property and and Letters of equipment garnishments guarantee equipment garnishments guarantee Civil, labor and tax 94,641 3,910,014 2,301,210 176,591 6,663,805 1,669,476 Total 94,641 3,910,014 2,301,210 176,591 6,663,805 1,669,476 |
Labor | |
PROVISIONS AND CONTINGENCIES | |
Schedule of provision contingencies | Amounts involved Nature/Degree of Risk Provisions - probable losses 779,686 980,596 Possible losses 191,398 261,876 |
Tax | |
PROVISIONS AND CONTINGENCIES | |
Schedule of provision contingencies | Amounts involved Nature/Degree of Risk Provisions - probable losses 1,951,897 3,579,208 Federal 526,943 502,153 State 909,547 231,998 Municipal 33,607 32,054 FUST, FISTEL and EBC 481,800 2,813,003 Possible losses 36,103,128 35,388,910 Federal 12,025,529 8,226,374 State 16,294,685 18,968,349 Municipal 637,690 548,014 FUST, FUNTTEL and FISTEL 7,145,224 7,646,173 |
Civil | |
PROVISIONS AND CONTINGENCIES | |
Schedule of provision contingencies | Amounts involved Nature/Degree of Risk Provisions - probable losses 1,004,803 1,055,877 Possible losses 3,493,655 2,858,796 |
Regulatory | |
PROVISIONS AND CONTINGENCIES | |
Schedule of provision contingencies | Amounts involved Nature/Degree of Risk Provisions - probable losses 1,022,216 1,103,792 Possible losses 6,119,136 5,065,907 |
LOANS, FINANCING AND DEBENTUR_2
LOANS, FINANCING AND DEBENTURES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
LOANS, FINANCING AND DEBENTURES | |
Schedule of balance of amounts payable relating to finance leases | Nominal value payable 766,215 787,147 Unrealized financial expenses (373,188) (401,687) Present value payable 393,027 385,460 Current 53,133 51,036 Non-current 339,894 334,424 |
Schedule of aging list of finance lease payable | Aging list of finance lease payable at December 31, 2018 is as follows: Nominal value Present value payable payable Up to 1 year 60,823 53,133 From 1 to 5 years 207,450 146,797 Over five years 497,942 193,097 Total 766,215 393,027 |
Schedule of repayments by year of maturity | Loans and Contingent Year financing Debentures Finance lease Consideration Total 2020 359,948 1,025,097 41,441 — 1,426,486 2021 231,764 1,025,097 36,704 — 1,293,565 2022 209,948 999,755 35,190 — 1,244,893 2023 18,082 — 33,463 — 51,545 2024 onwards — — 193,096 465,686 658,782 Total 819,742 3,049,949 339,894 465,686 4,675,271 |
Schedule of changes in borrowings | Loans and Finance Financing - Contingent financing Debentures lease Suppliers Consideration Total Balance at 12.31.16 4,158,015 3,554,307 374,428 722,591 414,733 9,224,074 Additions 55,876 3,000,000 13,462 571,444 — 3,640,782 Government grants (Note 21) (1,581) — — — — (1,581) Financial charges (Note 27) 300,153 485,295 45,265 70,603 31,411 932,727 Issue costs — (4,926) — — — (4,926) Foreign exchange variation (Note 27) 15,846 — — — — 15,846 Write-offs (payments) (2,025,963) (2,513,937) (47,695) (757,486) — (5,345,081) Balance at 12.31.17 2,502,346 4,520,739 385,460 607,152 446,144 8,461,841 Additions — — 18,672 506,397 — 525,069 Government grants (Note 21) (40) — — — — (40) Financial charges (Note 27) 169,771 242,415 45,501 33,169 19,542 510,398 Issue costs — 1,471 — — — 1,471 Foreign exchange variation (Note 27) 28,848 — — — — 28,848 Write-offs (payments) (1,118,355) (1,590,715) (56,606) (622,474) — (3,388,150) Balance at 12.31.18 1,582,570 3,173,910 393,027 524,244 465,686 6,139,437 |
Summary of funding and payments | 2018 2017 Write-offs (payments) Write-offs (payments) Additions Principal Financial Total Additions Principal Financial Total Loans and financing — (961,687) (156,668) (1,118,355) 55,876 (1,781,261) (244,702) (2,025,963) BNDES — (946,763) (152,447) (1,099,210) 15,998 (825,256) (213,752) (1,039,008) BNB — (14,924) (4,221) (19,145) 39,878 (11,808) (4,073) (15,881) Resolution 4131 - Scotiabank and Bank of America — — — — — (944,197) (26,877) (971,074) Debêntures — (1,324,723) (265,992) (1,590,715) 3,000,000 (2,000,000) (513,937) (2,513,937) 4th issue – Series 3 — — (1,583) (1,583) — — (1,522) (1,522) 1st issue – Minas Comunica — (24,723) (1,082) (25,805) — — — — 3rd issue — — — — — (2,000,000) (246,817) (2,246,817) 4th issue — (1,300,000) (47,257) (1,347,257) — — (151,152) (151,152) 5th issue — — (149,795) (149,795) 2,000,000 — (114,446) (114,446) 6th issue — — (66,275) (66,275) 1,000,000 — — — Suppliers 506,397 (571,434) (51,040) (622,474) 571,444 (668,512) (88,974) (757,486) Finance lease 18,672 (35,375) (21,231) (56,606) 13,462 (35,722) (11,973) (47,695) Total 525,069 (2,893,219) (494,931) (3,388,150) 3,640,782 (4,485,495) (859,586) (5,345,081) |
Loans and financing | |
LOANS, FINANCING AND DEBENTURES | |
Schedule of borrowings | Information as of December 31, 2018 12/31/18 12/31/17 Currency Annual interest rate Maturity Guarantees Current Non-current Total Current Non-current Total Local currency 1,367,551 4,675,271 6,042,822 2,891,142 5,345,445 8,236,587 Financial Institutions (b.1) 666,213 819,742 1,485,955 820,468 1,456,624 2,277,092 BNDES FINEM URTJLP TJLP+ 0 to 4.08% Jul-19 (1) 214,012 — 214,012 371,946 213,958 585,904 BNDES FINEM URTJLP TJLP+ 0 to 3.38% Aug-20 (3) 184,200 122,011 306,211 184,007 303,560 487,567 BNDES FINEM R$ Nov-19 (3) 13,403 — 13,403 14,654 13,377 28,031 BNDES FINEM URTJLP TJLP+ 0 to 3.12% Jan-23 (3) 103,486 316,269 419,755 101,879 413,552 515,431 BNDES FINEM R$ 4.00% to 6.00% Jan-23 (3) 37,837 94,516 132,353 37,061 132,092 169,153 BNDES FINEM R$ Selic Acum. D-2 + 2.32% Jan-23 (3) 80,014 245,887 325,901 70,426 305,952 376,378 BNDES PSI R$ 2.5% to 5.5% Jan-23 (2) 18,207 1,263 19,470 25,405 19,413 44,818 BNB R$ 7.06% to 10% Aug-22 (4) 15,054 39,796 54,850 15,090 54,720 69,810 Suppliers (b.2) R$ Dec-19 524,244 — 524,244 607,152 — 607,152 Debentures (b.3) 123,961 3,049,949 3,173,910 1,412,486 3,108,253 4,520,739 4th issue – Series 3 R$ IPCA+4.00% Oct-19 (5) 41,121 — 41,121 312 40,010 40,322 1st issue – Minas Comunica R$ IPCA+0.50% Jul-21 (5) 26,250 52,499 78,749 24,088 72,264 96,352 4th issue R$ 100% of CDI + 0.68% Apr-18 (5) — — — 1,317,513 — 1,317,513 5th issue R$ 108.25% of CDI Feb-22 (5) 51,233 1,997,694 2,048,927 64,397 1,996,517 2,060,914 6th issue R$ 100% of CDI + 0.24% Nov-20 (5) 5,357 999,756 1,005,113 6,176 999,462 1,005,638 Finance lease (b.4) R$ IPCA and IGP-M Aug-33 53,133 339,894 393,027 51,036 334,424 385,460 Contingent Consideration (b.5) R$ Selic — 465,686 465,686 — 446,144 446,144 Foreign Currency 96,615 — 96,615 142,299 82,955 225,254 Financial Institutions (b.1) 96,615 — 96,615 142,299 82,955 225,254 BNDES FINEM UMBND ECM + 2.38% Jul-19 (1) 96,615 — 96,615 142,299 82,955 225,254 Total 1,464,166 4,675,271 6,139,437 3,033,441 5,428,400 8,461,841 (1) Guarantee in receivables relating to 15% of the outstanding debt balance or four times the largest installment, whichever is higher. (2) Pledge of financed assets. (3) Assignment of receivables corresponding to 20% of outstanding debt balance or one time the last installment of sub-credit facility "A" (UMIPCA) plus five times the last installment of each of the other sub-credit facilities, whichever is greater. (4) Bank guarantee provided by Banco Safra in an amount equivalent to 100% of the outstanding financing debt balance. Setting up a liquidity fund represented by financial investments in the amount equivalent to three installments of repayment referenced to the average post-grace period performance. Balances were R$12,473 and R$11,722 at December 31, 2018 and 2017, respectively. (5) Unsecured. |
Debentures | |
LOANS, FINANCING AND DEBENTURES | |
Schedule of borrowings | Amounts Issue Issue date Issued Outstanding Issue value 4th issue – Series 3 10/15/2009 810,000 23,557 810,000 1st issue – Minas Comunica 12/17/2007 5,550 5,550 55,500 4th issue 4/25/2013 130,000 130,000 1,300,000 5th issue 2/8/2017 200,000 200,000 2,000,000 6th issue 11/27/2017 100,000 100,000 1,000,000 |
DEFERRED INCOME (Tables)
DEFERRED INCOME (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DEFERRED INCOME | |
Schedule of deferred income | INCOME Services and goods (1) — 301,292 Disposal of PP&E (2) 89,835 165,162 Activation revenue (3) — 7,959 Customer loyalty program (4) — 50,354 Government grants (5) 94,335 115,379 Contractual Liabilities - IFRS 15 (6) 532,207 — Other (7) 59,658 83,052 Total 776,035 723,198 Current 525,509 372,561 Non-current 250,526 350,637 (1) This refers mainly to the balances of revenues from recharging prepaid services, which are recognized in income as services that are provided to customers. It includes the amount of the agreement the Company entered for industrial use of its mobile network by a different SMP operator in Regions I, II and III of the general authorizations plan, which is intended solely for the rendering of SMP services by the operator for its customers. (2) Includes the net balances of the residual values from sale of non-strategic towers and rooftops, which are transferred to income as the conditions for recognition are fulfilled. (3) This refers to the deferred activation revenue (fixed) recognized in income over the estimated period in which a customer remains in the base. (4) This refers to points earned under the Company's loyalty program, which enables customers to accumulate points by paying bills relating to use of services offered. The balance represents the Company's estimate of customers exchanging points for goods and/or services in the future. (5) This refers to: i) government subsidy arising from funds obtained from BNDES credit lines to be used in the acquisition of domestic equipment, which have been amortized over the useful life cycle of the equipment; and ii) subsidies arising from projects related to state taxes, which are being amortized over the contractual period. (6) Refers to the balance of contractual liabilities arising from the adoption of IFRS 15 (Note 2.b) and amounts related to customer contracts (services and goods, activation revenue and customer loyalty program) were reclassified to the line of "Contractual Liabilities - IFRS 15". The amounts on December 31, 2018 were R$372,167, of which: (i) services and goods totaled R$318,778; and (ii) customer loyalty program totaled R$53,389. (7) Includes amounts of the reimbursement for costs for leaving radio frequency sub-bands 2,500MHz to 2,690MHz due to cancellation of the Multichannel Multipoint Distribution Service |
OTHER LIABILITIES (Tables)
OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER LIABILITIES | |
Schedule of other liabilities | Authorization licenses (1) 124,807 258,742 Liabilities with related parties (Note 28) 31,716 125,987 Payment for license renewal (2) 222,143 167,536 Third-party withholdings (3) 120,711 144,593 Deficit in post-employment benefit plans (Note 30) 679,478 531,938 Amounts to be refunded to subscribers 56,897 189,380 Other liabilities 61,957 72,893 Total 1,297,709 1,491,069 Current 368,376 718,468 Non-current 929,333 772,601 (1) As at December 31, 2017, this included a portion of the Company's liability arising from an agreement entered into with ANATEL, whereby the operators that won the auction of the 4G licenses organized Entidade Administradora do Processo de Redistribuição e Digitalização de Canais de TV e RTV ("EAD"), which will be responsible for equally performing all TV and RTV channel redistribution procedures and solutions to harmful interference in radio communication systems, in addition to other operations in which the winning operators have obligations, as defined in the agreement. On January 31, 2018, the Company paid R$142,862 to EAD, referring to the last installments of the auction of 700 MHz national frequency bands for the provision of SMP, performed by ANATEL on September 30, 2014. (2) This refers to the cost of renewing STFC and SMP licenses. (3) This refers to payroll withholdings and taxes withheld from pay-outs of interest on equity and on provision of services. |
EQUITY (Tables)
EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
EQUITY | |
Schedule of distribution of capital | Common Shares Preferred Shares Grand Total Shareholders Number % Number % Number % Controlling Group 540,033,264 94.47 % 704,207,855 62.91 % 1,244,241,119 73.58 % Telefónica Latinoamérica Holding, S.L. 46,746,635 8.18 % 360,532,578 32.21 % 407,279,213 24.09 % Telefónica 198,207,608 34.67 % 305,122,195 27.26 % 503,329,803 29.76 % SP Telecomunicações Participações 294,158,155 51.46 % 38,537,435 3.44 % 332,695,590 19.67 % Telefónica Chile 920,866 0.16 % 15,647 0.00 % 936,513 0.06 % Other shareholders 29,320,789 5.13 % 415,131,868 37.09 % 444,452,657 26.28 % Treasury Shares 2,290,164 0.40 % 983 0.00 % 2,291,147 0.14 % Total shares 571,644,217 100.00 % 1,119,340,706 100.00 % 1,690,984,923 100.00 % Treasury Shares (2,290,164) (983) (2,291,147) Total shares outstanding 569,354,053 1,119,339,723 1,688,693,776 |
Schedule of other capital reserves | Excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date (1) 2,735,930 2,735,930 Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (2) (112,107) (112,107) Direct costs of capital increases (3) (62,433) (62,433) Incorporation of shares of GVTPart. (4) (1,188,707) (1,188,707) Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData (5) (75,388) (75,388) Preferred shares delivered referring to the judicial process of expansion plan (6) 2 2 Effects of the acquisition of Terra Networks Brasil by TData (7) (59,029) (59,029) Other 10 — Total 1,238,278 1,238,268 (1) Refers to the excess of the value in the issue or capitalization, in relation to the basic value of the share on the issue date. (2) The cancellation of 2,332,686 shares issued by the Company, held in treasury, approved at the Special Shareholders' Meeting held on March 12, 2015. (3) Refers to direct costs (net of taxes) of Company capital increases on April 28, 2015 and April 30, 2015, arising from the Primary Offering of Shares. (4) Refers to the difference between the economic values of the merger of shares of GVTPart. and market value of shares, issued on the transaction closing date. (5) Regarding the effects of the acquisition of shares of non-controlling shareholders that, with the adoption of IFRS 10 35 and 36, would be recorded in equity when there is no change in the shareholding control. (6) Refers to the effects of write-offs due to the transfer of 62 preferred shares in treasury to outstanding shares, for compliance with judicial process decisions in which the Company is involved regarding rights to the complementary receipt of shares calculated in relation to network expansion plans after 1996. (7) Refers to the effects of TData's acquisition of Terra Networks, related to the difference between the consideration given in exchange for the equity interest obtained and the value of the net assets acquired (Note 1 c.2). |
Schedule of treasury shares | Shares In thousands of Treasury stock Common shares Preferred shares Total reais At 12.31.16 2,290,164 339 2,290,503 (87,790) Acquisition of shares in the financial market (2) — 706 706 (32) Transfer of lawsuits concerning judicial proceedings (1) — (62) (62) 2 At 12.31.17 2,290,164 983 2,291,147 (87,820) At 12.31.18 2,290,164 983 2,291,147 (87,820) (1) The Company acquired preferred shares issued by the Company in the financial market: (i) on June 1, 2017, 45 shares at a unit price of R$ 47.31, totaling R$ 2; and (ii) on July 5, 2017, 661 shares at a unit price of R$45.26, totaling R$32. (2) Refers to the transfer of preferred shares in treasury to outstanding shares to comply with decisions of lawsuits in which the Company is involved that deals with rights to the complementary receipt of shares calculated in relation to plans to expand the network after 1996. |
Schedule of income reserves | Expansion and Modernization Legal reserve Reserve Tax incentives Total At 12.31.16 1,907,905 550,000 17,069 2,474,974 Reversal of reserves — (550,000) — (550,000) Recording of reserves 230,439 297,000 10,815 538,254 At 12.31.17 2,138,344 297,000 27,884 2,463,228 Reversal of reserves — (297,000) — (297,000) Recording of reserves 446,413 1,700,000 11,529 2,157,942 At 12.31.18 2,584,757 1,700,000 39,413 4,324,170 |
Schedule of calculation of dividends and interest on equity | Net income for the year 8,928,258 4,608,790 Allocation to legal reserve (446,413) (230,439) (-) Tax incentives - not distributable (11,529) (10,815) Adjusted net income 8,470,316 4,367,536 Dividend and IOE distributed for the year: (4,550,000) (2,416,639) Interest on equity (gross) (4,550,000) (2,416,639) Balance of unallocated net income 3,920,316 1,950,897 (+) Reversal special reserve for modernization and expansion 297,000 550,000 (-) Effects of the initial adoption of IFRS 9 and 15, net of taxes in 01.01.18 (138,663) — (+) Unclaimed dividends and interest on equity 152,770 101,778 (+-) Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes (62,739) (113,811) Income available to be distributed 4,168,684 2,488,864 Proposal for Distributions: Special reserve for modernization and expansion 1,700,000 297,000 Additional proposed dividends 2,468,684 2,191,864 Proposed additional dividends - Net income for the year 2,171,684 1,641,864 Proposed additional dividends - Based on prior year's net income, referring to the reversal of the special reserve for expansion and modernization 297,000 550,000 Total 4,168,684 2,488,864 Mandatory minimum dividend - 25% of adjusted net income 2,117,579 1,091,884 |
Schedule of proposed for deliberation per share | Total proposed for deliberation - per share Common shares 1.371013 1.217277 Preferred shares (1) 1.508114 1.339005 (1) 10% higher than the amount allocated to each common share, under Article 7 of the Company Articles of Incorporation. |
Schedule of allocation of interim dividends and interest on equity | 2018 Dates Gross Amount Net Value Amount per Share (1) Beginning of Approval Credit Payment Common Preferred (2) Total Common Preferred (2) Total Common Preferred (2) 06/18/18 06/29/18 Until 12/31/19 126,479 273,521 400,000 107,507 232,493 340,000 0.188823 0.207705 09/05/18 09/17/18 Until 12/31/19 885,353 1,914,647 2,800,000 752,550 1,627,450 2,380,000 1.321761 1.453937 12/04/18 12/17/18 Until 12/31/19 426,867 923,133 1,350,000 362,837 784,663 1,147,500 0.637278 0.701006 Total 1,438,699 3,111,301 4,550,000 1,222,894 2,644,606 3,867,500 2017 Dates Gross Amount Net Value Amount per Share (1) Beginning of Approval Credit Payment Common Preferred (2) Total Common Preferred (2) Total Common Preferred (2) 02/13/17 02/24/17 08/21/18 56,916 123,084 180,000 48,379 104,621 153,000 0.084970 0.093467 03/20/17 03/31/17 08/21/18 110,669 239,331 350,000 94,069 203,431 297,500 0.165220 0.181742 06/19/17 06/30/17 08/21/18 30,039 64,961 95,000 25,533 55,217 80,750 0.044845 0.049330 09/18/17 09/29/17 08/21/18 96,440 208,560 305,000 81,974 177,276 259,250 0.143978 0.158375 12/14/17 12/26/17 08/21/18 470,072 1,016,567 1,486,639 399,561 864,082 1,263,643 0.701779 0.771957 Total 764,136 1,652,503 2,416,639 649,516 1,404,627 2,054,143 (1) The amounts of IOE are calculated and stated net of IRRF. The immune shareholders received the full IOE amount, without withholding income tax at source. (2) The gross and net values for the preferred shares are 10% higher than those attributed to each common share, as per Article 7 of the Company's Articles of Incorporation. |
Schedule of changes in other comprehensive income | Financial assets at Currency translation fair value through other effects - foreign comprehensive income Derivative transactions investments Total Balances at 12/31/16 (8,881) 3,549 16,793 11,461 Translation gains — — 11,239 11,239 Losses from future contracts — (1,595) — (1,595) Gains on financial assets at fair value through other comprehensive income 223 — — 223 Balances at 12/31/17 (8,658) 1,954 28,032 21,328 Translation gains — — 9,927 9,927 Losses from future contracts — (1,618) — (1,618) Losses on financial assets at fair value through other comprehensive income (412) — — (412) Balances at 12/31/18 (9,070) 336 37,959 29,225 |
Schedule of calculation of earnings per share | Net income for the year 8,928,258 4,608,790 4,085,242 Common shares 2,823,093 1,457,288 1,291,743 Preferred shares 6,105,165 3,151,502 2,793,499 Number of shares (thousands): 1,688,694 1,688,694 1,688,694 Weighted average number of outstanding common shares for the year 569,354 569,354 569,354 Weighted average number of outstanding preferred shares for the year 1,119,340 1,119,340 1,119,340 Basic and diluted earnings per share: Common shares 4.96 2.56 2.27 Preferred shares 5.45 2.82 2.50 |
NET OPERATING REVENUE (Tables)
NET OPERATING REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
NET OPERATING REVENUE | |
Schedule of net operating revenue | Gross operating revenue 65,794,397 66,243,174 Services (1) 61,292,362 62,696,433 Sale of goods (2) 4,502,035 3,546,741 Deductions from gross operating revenue (22,331,657) (23,036,342) (22,498,269) Taxes (14,559,915) (16,058,584) (15,388,784) Services (13,820,784) (15,468,315) (14,780,018) Sale of goods (739,131) (590,269) (608,766) Discounts granted and return of goods (7,771,742) (6,977,758) (7,109,485) Services (6,288,941) (5,340,476) (5,612,695) Sale of goods (1,482,801) (1,637,282) (1,496,790) Net operating revenue 43,462,740 43,206,832 42,508,459 Services 41,182,637 41,887,642 41,120,386 Sale of Goods 2,280,103 1,319,190 1,388,073 (1) These include telephone services, use of interconnection network, data and SVA services, cable TV and other services. (2) These include sale of goods (handsets, SIM cards and accessories) and equipment of “Soluciona TI”. |
OPERATING COSTS AND EXPENSES (T
OPERATING COSTS AND EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OPERATING COSTS AND EXPENSES | |
Schedule of operating costs and expenses | 2018 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (872,032) (2,574,498) (549,610) (3,996,140) Third-party services (2) (6,656,924) (6,989,006) (1,237,527) (14,883,457) Rental, insurance, condominium and connection means (3) (2,957,489) (147,613) (202,881) (3,307,983) Taxes, charges and contributions (4) (1,594,836) (30,703) (36,122) (1,661,661) Estimated impairment losses on accounts receivable (Note 4) — (1,533,660) — (1,533,660) Depreciation and amortization (5) (6,487,909) (1,352,638) (528,076) (8,368,623) Cost of goods sold (2,406,099) — — (2,406,099) Materials and other operating costs and expenses (50,478) (204,623) (44,754) (299,855) Total (21,025,767) (12,832,741) (2,598,970) (36,457,478) 2017 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (845,358) (2,387,314) (493,095) (3,725,767) Third-party services (2) (7,032,252) (7,438,937) (1,232,379) (15,703,568) Rental, insurance, condominium and connection means (3) (2,624,405) (151,455) (204,701) (2,980,561) Taxes, charges and contributions(4) (1,792,764) (39,050) (34,779) (1,866,593) Estimated impairment losses on accounts receivable (Note 4) — (1,481,015) — (1,481,015) Depreciation and amortization (5) (5,963,153) (1,433,297) (457,284) (7,853,734) Cost of goods sold (1,955,890) — — (1,955,890) Materials and other operating costs and expenses (58,708) (205,406) (20,867) (284,981) Total (20,272,530) (13,136,474) (2,443,105) (35,852,109) 2016 General and Cost of sales administrative and services Selling expenses expenses Total Personnel (1) (976,233) (2,136,399) (747,156) (3,859,788) Third-party services (2) (7,629,246) (7,216,894) (1,254,187) (16,100,327) Rental, insurance, condominium and connection means (3) (2,326,219) (141,135) (220,655) (2,688,009) Taxes, charges and contributions (4) (1,861,237) (5,933) (92,394) (1,959,564) Estimated impairment losses on accounts receivable (Note 4) — (1,348,221) — (1,348,221) Depreciation and amortization (5) (5,821,620) (1,408,866) (423,920) (7,654,406) Cost of goods sold (2,118,940) — — (2,118,940) Materials and other operating costs and expenses (89,519) (197,918) (55,074) (342,511) Total (20,823,014) (12,455,366) (2,793,386) (36,071,766) (1) (2) (3) (4) (5) |
OTHER OPERATING INCOME (EXPEN_2
OTHER OPERATING INCOME (EXPENSES) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER OPERATING INCOME (EXPENSES) | |
Summary of other operating income (expenses) | Recovered expenses and fines (1) 3,962,150 355,415 504,877 Provisions for labor, tax and civil contingencies (Note 19) (2) (1,258,966) (999,419) (985,176) Net gain (loss) on asset disposal/loss (3) 114,853 108,767 463,602 Other operating income (expenses) (367,115) (187,249) (51,977) Total 2,450,922 (722,486) (68,674) Other operating income 4,077,003 464,182 968,479 Other operating expenses (1,626,081) (1,186,668) (1,037,153) Total 2,450,922 (722,486) (68,674) (1) (2) (3) |
FINANCIAL INCOME (EXPENSES) (Ta
FINANCIAL INCOME (EXPENSES) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INCOME (EXPENSES) | |
Schedule of financial income (expenses) | Financial Income Interest income 246,083 655,474 719,399 Interest receivable (customers, taxes and other) 118,476 124,391 104,837 Gain on derivative transactions (Note 31) 305,996 373,971 994,801 Foreign exchange variations on loans and financing (Note 20) 32,326 113,203 487,747 Other revenues from foreign exchange and monetary variation (1) 3,341,211 406,013 374,169 Other financial income 68,548 82,906 100,406 Total 4,112,640 1,755,958 2,781,359 Financial Expenses Loan, financing, debenture and finance lease charges (Nota 20) (510,398) (932,727) (1,061,098) Foreign exchange variation on loans and financing (Note 20) (61,174) (129,049) (214,952) Loss on derivative transactions (Note 31) (295,208) (415,956) (1,342,671) Interest payable (financial institutions, provisions, trade accounts payable, taxes and other) (186,238) (136,425) (278,175) Other expenses with foreign exchange and monetary variation (963,463) (876,948) (830,466) IOF, Pis, Cofins and other financial expenses (2) (269,006) (167,897) (288,538) Total (2,285,487) (2,659,002) (4,015,900) Financial income (expenses), net 1,827,153 (903,044) (1,234,541) (1) |
BALANCES AND TRANSACTIONS WIT_2
BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |
Schedule of consolidated balances with the related parties | Balance Sheet - Assets 12/31/18 12/31/17 Cash and Cash and Companies Type of transaction equivalents Accounts Other assets equivalents Accounts receivable, Other assets Parent Companies SP Telecomunicações Participações d) / l) / y) — — 10,083 — 531 46 Telefónica LatinoAmerica Holding l) — — 60,387 — — 135,486 Telefónica l) / z) — 9,300 29,757 — 492 158 — 9,300 100,227 — 1,023 135,690 Other Group companies Colombia Telecomunicaciones ESP k) / l) — 1,334 520 — 1,210 4,505 Media Networks Brasil Soluções Digitais a) / d) /f) / l) / p) — 903 4,051 — 1,017 2,106 T.O2 Germany GMBH CO. OHG k) — 20,877 — — 22,315 — Telefónica Venezolana k) — 5,926 2,196 — 6,067 — Telefônica Digital España g) / l) — 197 294 — 1,929 — Telefônica Factoring do Brasil a) / d) / l) / s) — 6,360 133 — 12,337 93 Telefónica Global Technology l) — — — — — 13,600 Telefônica Inteligência e Segurança Brasil a) / d) / l) — 800 986 — 271 1,013 Telefónica International Wholesale Services Espanha j) / k) — 46,537 — — 69,087 — Telefônica Serviços de Ensino a) / p) — 286 — — 175 — Telefónica Moviles Argentina k) — 5,074 — — 7,194 — Telefónica Moviles Del Espanha k) — 7,576 — — 8,918 — Telefónica USA (1) j) — 9,005 — — 7,157 — Telfisa Global BV q) 46,755 — — 9,523 — — Telxius Cable Brasil a) / d) / l) / p) — 11,628 5,295 — 28,981 819 Telxius Torres Brasil d) / p) / x) — 6,776 4,268 — 14,666 5,106 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia g) / h) — 5,341 — — 7,822 — Other a) / d) / k) / g) / h) / l) / p) — 10,894 2,806 — 10,852 3,801 46,755 139,514 20,549 9,523 199,998 31,043 Total 46,755 148,814 120,776 9,523 201,021 166,733 Current assets 46,755 148,814 114,715 9,523 201,021 164,249 Non-current assets — — 6,061 — — 2,484 Balance Sheet - Liabilities 12.31.18 12.31.17 Trade accounts Trade accounts payable and payable and Companies Type of transaction other payables Other liabilities other payables Other liabilities Parent Companies SP Telecomunicações Participações y) — 21,901 6,656 15,000 Telefónica LatinoAmerica Holding l) — — 86 — Telefónica l) / m) 687 1,393 1,205 99,950 687 23,294 7,947 114,950 Other Group companies Colombia Telecomunicaciones ESP k) 1,056 — 471 — Fundação Telefônica l) — 82 — 137 Media Networks Latina America SAC b) 10,212 — 4,248 — Media Networks Brasil Soluções Digitais f) 44,693 318 33,751 318 T.O2 Germany GMBH CO. OHG k) 5,706 — 5,477 — Telefónica Venezolana k) 5,410 — 5,240 — Telefónica Compras Electrónicas v) 32,582 — 24,311 — Telefônica Digital España o) 43,340 — 46,645 — Telefônica Factoring do Brasil l) / s) — 2,770 — 146 Telefónica Global Technology e) 28,750 — 15,671 — Telefônica Inteligência e Segurança Brasil c) / l) 52,184 27 15,336 27 Telefónica International Wholesale Services Espanha f) / k) 26,097 — 44,240 8 Telefônica Serviços de Ensino r) 22,518 — 37,931 — Telefónica Moviles Argentina k) 4,160 — 3,865 — Telefónica Moviles Del Espanha k) 5,233 — 3,589 — Telefónica USA (1) f) 4,411 200 7,425 171 Telxius Cable Brasil f) / l) 39,662 2,067 44,037 2,068 Telxius Torres Brasil x) 38,735 1,926 37,718 7,757 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia h) 1,766 — 907 — Other k) / h) / l) / u) / w) / aa) 16,310 1,032 12,035 405 382,825 8,422 342,897 11,037 Total 383,512 31,716 350,844 125,987 Current liabilities 383,512 22,220 350,844 124,749 Non-current liabilities — 9,496 — 1,238 Income statement 2018 2017 2016 Cost and Cost and Cost and other other other expenses expenses expenses Operating (revenues) Financial Operating (revenues) Financial Operating (revenues) Financial Companies Type of transaction revenues operating result revenues operating result revenues operating result Parent Companies SP Telecomunicações Participações d) — 347 — — 268 — — 67 — Telefónica LatinoAmerica Holding l) — 16,466 9,077 — 36,523 11,030 — 87,526 4,348 Telefónica l) / m) — (373,690) (16,680) — (331,684) (996) — (319,708) (9,727) — (356,877) (7,603) — (294,893) 10,034 — (232,115) (5,379) Other Group companies Colombia Telecomunicaciones ESP k) 250 (4,280) (2,145) 349 (10) 604 217 (2,845) (926) Companhia AIX de Participações a) / u) 75 (22,645) — 36 (22,738) — 67 (21,316) — Fundação Telefônica t) — (12,223) — — (11,395) — - (10,530) — Media Networks Brasil Soluções Digitais a) / d) / f) / p) 2,006 (101,272) — 601 (57,177) — 572 (3,451) — Media Networks Latina America SAC b) — (34,791) (1,007) — (33,133) (516) - (17,133) (50) Telefônica Serviços de Ensino a) / p) / r) 1,158 (49,130) — 292 (54,781) — 2 (47,544) 1,311 T.O2 Germany GMBH CO. OHG k) 148 (1,975) — 75 (1,409) — 45 (4,527) — Telefónica Compras Electrónicas v) — (34,534) — — (29,062) — — (42,889) — Telefônica Digital España l) / o) — (124,537) (813) — (81,893) (2,600) — (44,872) (1,262) Telefônica Factoring do Brasil a) / d) / l) / s) 2,416 212 2,601 69 828 61 41 200 — Telefónica Global Technology e) / l) — (36,738) (4,134) — (36,395) 40 — (28,933) (756) Telefônica Inteligência e Segurança Brasil a) / c) / d) / l) / p) 1,568 (54,210) — 706 (40,918) — 1,041 (39,709) 389 Telefónica International Wholesale Services Espanha f) / j) / k) 53,357 (64,036) 9,771 56,728 (49,960) (2,564) 72,520 (56,293) (15,008) Telefónica Moviles Argentina k) 5,916 (3,437) — 3,746 6,147 — 3,072 (9,112) — Telefónica Moviles Del Chile k) 1,293 (3,159) 39 1,586 (2,196) 52 1,074 (1,096) (80) Telefónica Moviles Del Espanha k) (209) (4,166) — 1,048 (1,969) — (836) (2,170) — Telefónica USA (1) f) / j) 1,518 (19,441) (539) 2,392 (13,202) (2,185) 2,998 (14,970) (349) Telxius Cable Brasil a) / d) / f) / l) / p) 49,777 (206,095) (7,896) 15,045 (200,537) 787 17,624 (246,595) 244 Telxius Torres Brasil d) / l) / p) / x) 3,218 (129,706) — — (107,373) — 31 (72,460) 1,929 Terra Networks Chile, Terra Networks México, Terra Networks Perú, Terra Networks Argentina and Terra Networks Colômbia h) — (2,794) 1,450 — 1,072 (59) — — — Other a) / d) / f) / i) / k) / l) / n) / p) / w) 3,547 (23,957) (283) 7,725 (27,213) 130 18,375 (47,679) 2,367 126,038 (932,914) (2,956) 90,398 (763,314) (6,250) 116,843 (713,924) (12,191) Total 126,038 (1,289,791) (10,559) 90,398 (1,058,207) 3,784 116,843 (946,039) (17,570) (1) Terra Networks Operations values were reclassified in 2017 for better comparability, as a result of its incorporation by Telefónica USA in 2018. |
PENSION PLANS AND OTHER POST-_2
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of plans sponsored by the Company and its subsidiaries and related benefit types | Plan Type Entity Sponsor PBS-A Defined benefit (DB) Sistel Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás PAMA / PCE Defined benefit (DB) Sistel Telefônica Brasil, jointly with other telecoms resulting from privatization of the Sistema Telebrás Healthcare - Law No. 9656/98 Defined benefit (DB) Telefônica Brasil Telefônica Brasil, Terra Networks and TGLog CTB Defined benefit (DB) Telefônica Brasil Telefônica Brasil Telefônica BD Defined benefit (DB) VisãoPrev Telefônica Brasil VISÃO Defined contribution (DC) / Hybrid VisãoPrev Telefônica Brasil, Terra Networks and TGLog |
Schedule of reconciliation of net liabilities (assets) | 12.31.18 12.31.17 Post- Post- Post- Post- retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total Present value of DB plan obligations 2,011,355 1,313,157 3,324,512 1,861,651 1,050,576 2,912,227 Fair value of plan assets 2,999,669 763,325 3,762,994 2,585,679 726,060 3,311,739 Net liabilities (assets) (988,314) 549,832 (438,482) (724,028) 324,516 (399,512) Asset limitation 1,056,682 50,281 1,106,963 791,177 130,440 921,617 Non-current assets (10,997) — (10,997) (9,833) — (9,833) Current liabilities 8,114 11,553 19,667 7,914 9,021 16,935 Non-current liabilities 71,251 588,560 659,811 69,068 445,935 515,003 |
Summary of total expenses recognized in the income statement | 2018 2017 2016 Post- Post- Post- Post- Post- Post- retirement retirement retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total pension plans health plans Total Current service cost 2,931 13,722 3,044 7,606 2,811 2,761 5,572 Net interest on net actuarial assets/liabilities 6,074 45,892 51,966 5,258 29,325 34,583 5,278 2,986 8,264 Total 9,005 59,614 68,619 8,302 36,931 45,233 8,089 5,747 13,836 |
Summary of amounts recognized in other comprehensive income (loss) | 2018 2017 2016 Post- Post- Post- Post- Post- Post- retirement retirement retirement retirement retirement retirement pension plans health plans Total pension plans health plans Total pension plans health plans Total Actuarial (losses) gains (186,170) 184,527 (1,643) 325,292 208,195 533,487 (174,496) 240,072 65,576 Asset limitation effect 188,259 (93,125) 95,134 (309,780) (52,411) (362,191) 182,088 (10,897) 171,191 Total 2,089 91,402 93,491 15,512 155,784 171,296 7,592 229,175 236,767 |
Schedule of changes in amount net of liability (asset) of defined benefit, net | 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Net defined benefit liability (asset) at the beginning of the year 67,148 454,957 522,105 54,026 264,603 318,629 Business combinations — — — (12) 680 668 Expenses 9,005 59,614 68,619 8,302 36,931 45,233 Sponsor contributions (9,874) (5,860) (15,734) (10,680) (3,041) (13,721) Amounts recognized in OCI 2,089 91,402 93,491 15,512 155,784 171,296 Net defined benefit liability (asset) at the end of the year 68,368 600,113 668,481 67,148 454,957 522,105 Actuarial assets per balance sheet (10,997) — (10,997) (9,833) — (9,833) Actuarial liabilities per balance sheet 79,365 600,113 679,478 76,982 454,956 531,938 |
Schedule of results projected for 2019 | Post-retirement Post-retirement pension plans health plans Total Current service cost 3,076 16,178 19,254 Net interest on net defined benefit liability/asset 5,762 56,551 62,313 Total 8,838 72,729 81,567 |
Schedule of sponsoring company contributions projected for 2019 | Post-retirement Post-retirement pension plans health plans Total Sponsor contributions 2,221 8,114 10,335 Benefits paid directly by the sponsor 35 11,559 11,594 Total 2,256 19,673 21,929 |
Schedule of average weighted duration of defined benefit liability | Post-retirement Post-retirement pension plans health plans In 2018 7.8 years 16.5 years In 2017 8.5 years 18.7 years |
Schedule of actuarial assumptions | 12.31.18 Post-retirement pension plans Post-retirement health plans Discount rate to present value of defined benefit liability Visão: 9.0% Future salary growth rate PBS-A: N/A N/A Medical expense growth rate N/A Nominal annual adjustment rate of pension benefits N/A Medical service eligibility age N/A Eligibility on retirement 100% to 57 years Estimated retirement age PBS-A, CTB and Telefônica BD: 57 years 57 years Mortality table for nondisabled individuals PBS-A, CTB and Telefônica BD: AT- 2000 Basic segregated by gender, down-rated by 10% Visão: AT-2000 Basic segregated by gender, down-rated by 50% AT-2000 Basic segregated by gender, down-rated by 10% Mortality table for disabled individuals PBS-A, CTB and Telefônica BD: RP- 2000 Disabled Female, down-rated by 40% Visão: N/A RP-2000 Disabled Female, down-rated by 40% Disability table Telefônica BD: Light-Forte Light-Forte Turnover PBS-A, CTB and Telefônica BD: N/A PAMA and PCE: N/A 12.31.17 Post-retirement pension plans Post-retirement health plans Discount rate to present value of defined benefit liability Visão: 9.5% Future salary growth rate PBS-A: N/A N/A Medical expense growth rate N/A Nominal annual adjustment rate of pension benefits N/A Medical service eligibility age N/A Eligibility on retirement 100% to 57 years Estimated retirement age PBS-A, CTB and Telefônica BD: 57 years 57 years Mortality table for nondisabled individuals PBS-A, CTB and Telefônica BD: AT-2000 Basic AT-2000 Basic segregated by gender, down-rated by 10% Mortality table for disabled individuals PBS-A, CTB and Telefônica BD: RP-2000 Disabled RP-2000 Disabled Female, down-rated by 40% Disability table PBS-A, CTB, Telefônica BD and Tcoprev: Light-Forte Light-Forte Turnover PBS-A, CTB, Telefônica BD and Tcoprev: N/A PAMA and PCE: N/A |
Schedule of impacts on the plans' defined benefit liabilities due to the new definition of the actuarial assumptions | Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, based on current actuarial assumptions 2,011,355 1,313,157 3,324,512 Defined benefit liability, based on prior-year actuarial assumptions 1,982,085 1,194,355 3,176,440 Difference from change in actuarial assumptions 29,270 118,802 148,072 |
Summary of allocation of plan assets | 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans pension plans health plans Investments with market value quoted in active market: Fixed income investments National Treasury Note (NTN) 2,437,547 702,946 1,998,931 670,516 Treasury Financial Letter 177,319 — 199,135 55,544 Repurchase operations 196,830 — 142,228 — Debentures 13,487 — 13,209 — Treasury Financial Letter (LFT) 12,556 60,379 4,567 — FIDC shares / Others 2,356 — 3,694 — National Treasury Notes (LTN) 462 — 2,165 — Bank Deposit Certificates (CDB) 232 — 1,317 — Variable income investments Investments in energy sector 138 — 57,781 — Investments in food and beverage industry 17,921 — 32,337 — Investments in mining sector 287 — 1,197 — Investments in other sectors (1) 5,822 — 7,124 — Real estate investments 111,417 — 96,525 — Loans to participants 19,312 — 18,346 — Structured investments 743 — 3,753 — Investments with market value not quoted in active market: Loans to participants 1,249 — 1,590 — Structured investments 1,991 — 1,780 — Total 2,999,669 763,325 2,585,679 726,060 (1) Investments in variable income in the following industries: oil, gas and biofuel; telephony; steel and metals; construction and engineering; sales and distribution; transportation; wood and paper; education; financial services and banks; real estate, among; others. |
Discount rate | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of sensitivity analysis for actuarial assumptions | Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, discounted to present value at current rate 2,011,355 1,313,157 3,324,512 Defined benefit liability, discounted to present value considering a rate increased by 0.5% 1,934,817 1,219,080 3,153,897 Defined benefit liability, discounted to present value considering a rate decreased by 0.5% 2,093,908 1,419,123 3,513,031 |
Rate of growth of medical costs | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of sensitivity analysis for actuarial assumptions | Post-retirement Post-retirement pension plans health plans Total Defined benefit liability, projected by the current medical cost growth rate 2,011,355 1,313,157 3,324,512 Defined benefit liability, projected by the current medical cost growth considering a rate increased by 1% 2,011,355 1,535,641 3,546,996 Defined benefit liability, projected by the current medical cost growth considering a rate decreased by 1% 2,011,355 1,135,030 3,146,385 |
Defined benefit liability | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of changes in amount net of liability (asset) of defined benefit, net | 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Defined benefit liability at the beginning of the year 1,861,651 1,050,576 2,912,227 1,763,866 767,642 2,531,508 Liability assumed after acquisition of company — — — 249 680 929 Current service costs 2,931 13,722 16,653 3,044 7,606 10,650 Interest on actuarial liabilities 173,842 103,617 277,459 181,208 82,488 263,696 Benefits paid (136,916) (37,838) (174,754) (168,856) (30,777) (199,633) Member contributions paid 451 — 451 220 — 220 Actuarial losses (gains) adjusted by experience 80,126 64,278 144,404 (23,613) 128,469 104,856 Actuarial losses (gains) adjusted by demographic assumptions — 46,122 46,122 (3,320) (1,543) (4,863) Actuarial losses (gains) adjusted by financial assumptions 29,270 72,680 101,950 108,853 96,011 204,864 Defined benefit liability at the end of the year 2,011,355 1,313,157 3,324,512 1,861,651 1,050,576 2,912,227 |
Fair value of plan assets | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of changes in amount net of liability (asset) of defined benefit, net | 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Fair value of plan assets at the beginning of the year 2,585,679 726,060 3,311,739 2,703,593 667,993 3,371,586 Asset acquired on acquisition of company — — — 323 — 323 Benefits paid (128,991) (32,011) (161,002) (160,370) (27,767) (188,137) Participants contributions paid 451 — 451 220 — 220 Sponsor contributions paid 1,949 33 1,982 2,195 31 2,226 Interest income on plan assets 245,014 70,690 315,704 283,090 71,061 354,151 Return on plan assets excluding interest income 295,567 (1,447) 294,120 (243,372) 14,742 (228,630) Fair value of plan assets at the end of the year 2,999,669 763,325 3,762,994 2,585,679 726,060 3,311,739 |
Asset Limitation | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Schedule of changes in amount net of liability (asset) of defined benefit, net | 12.31.18 12.31.17 Post-retirement Post-retirement Post-retirement Post-retirement pension plans health plans Total pension plans health plans Total Asset Limitation at the beginning of the year 791,177 130,440 921,617 993,754 164,953 1,158,707 Interest on the asset limitation 77,246 12,966 90,212 107,140 17,898 125,038 Changes in the assets limitation, except interest 188,259 (93,125) 95,134 (309,779) (52,411) (362,190) Effect generated by company acquisition — — — 62 — 62 Asset Limitation at the end of the year 1,056,682 50,281 1,106,963 791,177 130,440 921,617 |
FINANCIAL INSTRUMENTS AND RIS_2
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Schedule of consolidated derivatives financial instruments that are registered with B3 and classified as swaps and that do not require margin deposits | Accumulated effects from fair value Notional Value Amount receivable (payable) Description Long position 1,184,064 1,181,056 95,533 164,405 Foreign Currency 335,194 326,149 50,536 102,876 US$ (1) (2) 241,332 201,445 24,608 49,110 EUR (2) 51,971 11,000 — 449 LIBOR US$ (1) 41,891 113,704 25,928 53,317 Floating rate 699,595 657,868 7,737 28,263 CDI (1) (2) 554,336 263,518 — 82 TJLP (4) 145,259 394,350 7,737 28,181 Inflation rates 149,275 197,039 37,260 33,266 IPCA (3) (5) 149,275 166,775 37,260 33,266 IGPM (6) — 30,264 — — Short position (1,184,064) (1,181,056) (39,383) (20,651) Floating rate (608,782) (860,686) (24,916) (15,819) CDI (1) (2) (3) (4) (5) (6) (608,782) (860,686) (24,916) (15,819) Foreign Currency (575,282) (320,370) (14,467) (4,832) US$ (2) (439,103) (183,824) (9,396) (2,471) EUR (1) (2) (115,233) (79,694) (222) (464) LIBOR US$ (1) (20,946) (56,852) (4,849) (1,897) Long position 95,533 164,405 Current 69,065 87,643 Non-current 26,468 76,762 Short position (39,383) (20,651) Current (16,538) (5,239) Non-current (22,845) (15,412) Amounts receivable, net 56,150 143,754 (1) Foreign currency swaps (US$ and LIBOR) x CDI (R$98,576) - swap transactions for varying debt repayment dates held to hedge currency risk affecting the Company's loans in US$ (carrying amount R$98,615). (2) Foreign currency swaps (Euro and CDI x Euro) (R$69,218) and (US$ and CDI x US$) (R$236,363) - maturing through February 13, 2019 to hedge currency risk affecting net amounts payable (carrying amount R$69,324 in Euros) and receivables (carrying amount R$239,884 in US$). (3) IPCA x CDI rate swaps (R$40,741) - maturing through 2019 to hedge the same flow as the debentures (4th issue - 3rd series) indexed to the IPCA (carrying amount R$41,121). (4) TJLP x CDI swaps (R$167,070) - maturing through 2019 to hedge the risk of TJLP variation on loan with BNDES (carrying amount R$159,789). (5) IPCA x CDI swaps (R$234,865) - maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA (carrying amount R$233,690). (6) The information of December 31, 2017 refers to the IGPM swap x CDI , swap operations contracted with the purpose of protecting the risk of IGPDI variation in regulatory commitments linked to a 4G license. The commitment of the 4G license was withdrawn from the EAD on January 31, 2018 for R$42,842 (Note 22) and the respective swap operations were finalized on the same date. |
Schedule of breakdown of swaps maturing after December 31, 2018 | Maturing in Amount receivable (payable) at Swap contract 2022 onwards Foreign currency x CDI 48,465 — — — 48,465 CDI x Foreign Currency (14,418) — — — (14,418) TJLP x CDI 7,737 — — — 7,737 IPCA x CDI 10,742 1,679 1,753 192 14,366 Total 52,526 1,679 1,753 192 56,150 |
Schedule of sensitivity analysis net exposure | Transaction Risk Probable 25% depreciation 50% depreciation Hedge (long position) Derivatives (depreciation risk EUR) (69,218) (86,522) (103,827) Payables in EUR Debt (appreciation risk EUR) (20,747) (25,934) (31,121) Receivables in EUR Debt (depreciation risk EUR) 88,749 110,936 133,123 Net Exposure (1,216) (1,520) (1,824) Hedge (short position) Derivatives (depreciation risk US$) (234,813) (293,516) (352,219) Payables in US$ Debt (appreciation risk US$) (112,981) (141,227) (169,472) Receivables in US$ Debt (depreciation risk US$) 352,866 441,082 529,299 Net Exposure 5,072 6,339 7,608 Hedge (long position) Derivatives (risk of decrease in IPCA) 273,712 254,731 238,133 Debt in IPCA Debt (risk of increase in IPCA) (353,905) (334,924) (318,326) Net Exposure (80,193) (80,193) (80,193) Hedge (long position) Derivatives (risk of decrease in UMBND) 98,576 98,396 98,217 Debt in UMBND Debt (risk of increase in UMBND) (96,614) (96,644) (96,471) Net Exposure 1,962 1,752 1,746 Hedge (long position) Derivatives (risk of decrease in TJLP) 152,558 151,975 151,402 Debt in TJLP Debt (risk of increase in TJLP) (937,998) (937,390) (936,792) Net Exposure (785,440) (785,415) (785,390) Hedge (CDI position) Hedge US$ and EUR (long position) Derivatives (risk of decrease in CDI) (125,631) (125,695) (125,754) Hedge IPCA (short position) Derivatives (risk of increase in CDI) (273,712) (254,731) (238,133) Hedge UMBND (short position) Derivatives (risk of increase in CDI) (98,576) (98,396) (98,217) Hedge TJLP (short position) Derivatives (risk of increase in CDI) (152,558) (151,975) (151,402) Net Exposure (650,477) (630,797) (613,506) Total net exposure in each scenario (1,510,292) (1,489,834) (1,471,559) Net effect on changes in current fair value — 20,458 38,733 |
Schedule of sensitivity analysis assumptions | Risk Variable Probable 25% depreciation 50% depreciation US$ 3.8748 4.8435 5.8122 EUR 4.4370 5.5463 6.6556 IPCA 3.69 % 4.62 % 5.54 % IGPM 7.54 % 9.42 % 11.31 % IGP-DI % % % UMBND 0.0756 0.0946 0.1135 URTJLP 0.0656 0.0820 0.0984 CDI 6.42 % 8.03 % 9.63 % |
Schedule of composition of financial assets and liabilities | Fair value Book value Fair value Classification by category hierarchy Financial Assets Current Cash and cash equivalents (Note 3) Amortized cost 3,381,328 4,050,338 3,381,328 4,050,338 Trade accounts receivable (Note 4) Amortized cost 8,304,382 8,588,466 8,304,382 8,588,466 Derivative transactions (Note 31) Measured at fair value through profit or loss Level 2 — 2,480 — 2,480 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 69,065 85,163 69,065 85,163 Non-current Investments pledged as collateral Amortized cost 76,934 81,486 76,934 81,486 Trade accounts receivable (Note 4) Amortized cost 426,252 273,888 426,252 273,888 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 26,468 76,762 26,468 76,762 Total financial assets 12,284,429 13,158,583 12,284,429 13,158,583 Financial Liabilities Current Trade accounts payable, net (Note 16) Amortized cost 7,642,782 7,447,100 7,642,782 7,447,100 Loans, financing and finance lease (Note 20) Amortized cost 1,076,451 1,316,034 1,135,732 1,463,609 Loans, financing and finance lease (Note 20) Measured at fair value through profit or loss Level 2 263,754 304,921 263,754 304,921 Debentures (Note 20) Amortized cost 82,840 1,412,174 237,144 1,532,427 Debentures (Note 20) Measured at fair value through profit or loss Level 2 41,121 312 41,121 312 Derivative transactions (Note 31) Measured at fair value through profit or loss Level 2 16,316 4,504 16,316 4,504 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 222 735 222 735 Non-current Loans, financing and finance lease (Note 20) Amortized cost 817,908 1,353,582 796,481 1,291,974 Loans, financing and finance lease (Note 20) Measured at fair value through profit or loss Level 2 341,728 520,421 341,728 520,421 Contingent consideration (Note 20) Measured at fair value through profit or loss Level 2 465,686 446,144 465,686 446,144 Debentures (Note 20) Amortized cost 3,049,949 3,068,243 2,866,981 2,866,372 Debentures (Note 20) Measured at fair value through profit or loss Level 2 — 40,010 — 40,010 Derivative transactions (Note 31) Measured at fair value through OCI Level 2 22,845 15,412 22,845 15,412 Total financial liabilities 13,821,602 15,929,592 13,830,792 15,933,941 |
Schedule of Company's ratio of consolidated debt to shareholders' equity | Cash and cash equivalents 3,381,328 4,050,338 Loans, financing, debentures, financial lease and contingent consideration (6,139,437) (8,461,841) Derivative transactions, net 56,150 143,754 Short-term investment pledged as collateral 12,473 11,722 Asset guarantor of contingent consideration 465,686 446,144 Net debt 2,223,800 3,809,883 Net equity 71,607,027 69,461,358 Net debt-to-equity ratio 3.11 % 5.48 % |
Summary the maturity profile of our consolidated financial liabilities as set forth in loan agreements | At 12.31.18 Less than one year From 1 to 2 years From 2 to 5 years Over 5 years Total Trade accounts payable 7,642,782 — — — 7,642,782 Loans, financing and finance lease 1,410,011 451,411 607,853 193,096 2,662,371 Contingent consideration — — — 465,686 465,686 Debentures 245,407 1,236,859 2,195,150 — 3,677,416 Derivative transactions 16,538 — — 22,845 39,383 Total 9,314,738 1,688,270 2,803,003 681,627 14,487,638 |
COMMITMENTS AND GUARANTEES (R_2
COMMITMENTS AND GUARANTEES (RENTALS) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND GUARANTEES (RENTALS) | |
Schedule of non-cancellable operating agreements | Up to 1 year 2,579,046 From 1 to 5 years 7,201,868 Over five years 2,810,647 Total 12,591,561 |
ADDITIONAL INFORMATION ON CAS_2
ADDITIONAL INFORMATION ON CASH FLOWS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ADDITIONAL INFORMATION ON CASH FLOWS | |
Schedule of reconciliation of cash flow financing activities | Cash flows from operating Cash flows from financing activities activities Financing activities not involving cash and cash equivalents Financial Interim and charges and Additions of unclaimed foreign financial lease dividends and Write-offs Write-offs exchange and supplier Business interest on At 12/31/16 Addtions (payments) (payments) variation financing combinations equity At 12/31/17 Interim dividends and interest on equity 2,195,031 — (3,668,551) — — — — 3,869,636 2,396,116 Loans and financing 4,880,606 55,876 (2,449,773) (333,676) 385,021 571,444 — — 3,109,498 Finance lease 374,428 — (35,722) (11,973) 45,265 13,462 — — 385,460 Debentures 3,554,307 3,000,000 (2,000,000) (513,937) 480,369 — — — 4,520,739 Derivative financial instruments (28,377) — (159,408) 2,086 42,334 — (389) — (143,754) Contingent Consideration 414,733 — — — 31,411 — — — 446,144 Total 11,390,728 3,055,876 (8,313,454) (857,500) 984,400 584,906 (389) 3,869,636 10,714,203 At 12/31/17 At 12/31/18 Interim dividends and interest on equity 2,396,116 — (4,136,878) — — — — 5,913,678 4,172,916 Loans and financing 3,109,498 — (1,533,121) (207,708) 231,748 506,397 — — 2,106,814 Finance lease 385,460 — (35,375) (21,231) 45,501 18,672 — — 393,027 Debentures 4,520,739 — (1,324,723) (265,992) 243,886 — — — 3,173,910 Derivative financial instruments (143,754) — 95,993 — 8,389 — — — (56,150) Contingent Consideration 446,144 — — — 19,542 — — — 465,686 Total 10,714,203 — (6,934,104) (494,931) 532,288 525,069 — 5,913,678 10,256,203 |
Schedule of main transactions that do not involve cash | Financing transactions with suppliers 506,397 571,444 Acquisition of assets through financial leases 18,672 13,462 Total 525,069 584,906 |
ADDITIONAL INFORMATION ON THE_2
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 - UNAUDITED (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 - UNAUDITED | |
Schedule of effects of the adoption of IFRS 15 | 2018 Income Statements Income Statements Income Statements Income Statements (IFRS 15) IFRS adjustments 15 (IAS 18) (IAS 18) (IAS 18) Net operating revenue (14,750) Cost of sales (21,025,767) — (21,025,767) (20,272,530) (20,823,014) Gross profit 22,436,973 (14,750) 22,422,223 22,934,302 21,685,445 Operating income (expenses) (12,980,789) (71,234) (13,052,023) (16,302,065) (15,317,426) Selling expenses (12,832,741) (71,234) (12,903,975) (13,136,474) (12,455,366) General and administrative expenses (2,598,970) — (2,598,970) (2,443,105) (2,793,386) Other operating income 4,077,003 — 4,077,003 464,182 968,479 Other operating expenses (1,626,081) — (1,626,081) (1,186,668) (1,037,153) Operating income 9,456,184 (85,984) 9,370,200 6,632,237 6,368,019 Financial income 4,112,640 — 4,112,640 1,755,958 2,781,359 Financial expenses (2,285,487) — (2,285,487) (2,659,002) (4,015,900) Equity pickup (5,847) — (5,847) 1,580 1,244 Income before taxes 11,277,490 (85,984) 11,191,506 5,730,773 5,134,722 Income and social contribution taxes (2,349,232) 29,234 (2,319,998) (1,121,983) (1,049,480) Net income for the year 8,928,258 (56,750) 8,871,508 4,608,790 4,085,242 |
OPERATIONS (Details)
OPERATIONS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Jul. 03, 2017 | |
OPERATIONS | |||
Periodicity of payment of fee payable in an service concession agreement term | 2 years | ||
Agreement term | 20 years | ||
Percentage of service concession fees based on prior year STFC revenue | 2.00% | ||
Periodicity of payment for the usage of frequencies associated with SMP after the first renewal of these agreements | 2 years | ||
Percentage of service concession fees based on prior year SMP revenues | 2.00% | ||
Percentage of service concession fees based on prior year SMP revenues in fifteen year of agreement term | 1.00% | ||
Agreement extension term | 15 years | ||
Telefonica | |||
OPERATIONS | |||
Percentage of ownership interest held | 73.58% | 73.58% | |
Terra Networks | |||
OPERATIONS | |||
Total consideration for acquisition | R$ 250000 |
BASIS OF PREPARATION AND PRES_3
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS (Details) - BRL (R$) R$ in Millions | Jan. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Financial effect due to application of IFRS 9 | |||
Financial effects due to application of IFRS | |||
Increase (Decrease) in retained earnings before deferred taxes | R$ 364 | ||
IFRS adjustments 15 | |||
Financial effects due to application of IFRS | |||
Increase (Decrease) in retained earnings before deferred taxes | R$ 156 | ||
Alianca Atlantica Holding B.V. (Alianca) | |||
Equity interests in subsidiaries | |||
Ownership interest in jointly-controlled subsidiary (as a percent) | 50.00% | 50.00% | |
Companhia AIX de Participacoes | |||
Equity interests in subsidiaries | |||
Ownership interest in jointly-controlled subsidiary (as a percent) | 50.00% | 50.00% | |
Companhia ACT de Participacoes (ACT) | |||
Equity interests in subsidiaries | |||
Ownership interest in jointly-controlled subsidiary (as a percent) | 50.00% | 50.00% | |
Telefonica Data S.A. (TData) | |||
Equity interests in subsidiaries | |||
Ownership interest in wholly-owned subsidiary (as a percent) | 100.00% | ||
Terra Networks | |||
Equity interests in subsidiaries | |||
Ownership interest in wholly-owned subsidiary (as a percent) | 100.00% | ||
TGLog | |||
Equity interests in subsidiaries | |||
Ownership interest in wholly-owned subsidiary (as a percent) | 99.99% | ||
POP Internet Ltda ("POP") | |||
Equity interests in subsidiaries | |||
Ownership interest in wholly-owned subsidiary (as a percent) | 99.99% | 99.99% |
BASIS OF PREPARATION AND PRES_4
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS - Changes in contractual assets, liabilities and incremental costs - (Details) - BRL (R$) R$ in Thousands | Jan. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2018 |
Contract assets | |||
Contract assets at beginning of period | R$ 160479 | R$ 160479 | |
Additions | 587,221 | ||
Write-offs, net | (585,675) | ||
Contract assets at end of period | R$ 162025 | 162,025 | |
Current | 162,025 | 162,025 | |
Contractual liabilities | |||
Contract liabilities at beginning of period | (178,897) | (178,897) | |
Reclassification | (383,688) | ||
Additions | (7,271,614) | ||
Write off | 7,301,992 | ||
Contract liabilities at end of period | (532,207) | (532,207) | |
Current | (504,473) | (504,473) | |
Non-current | (27,734) | (27,734) | |
Incremental Costs | |||
Incremental costs at beginning of period | 183,645 | 183,645 | |
Additions | 262,518 | ||
Write off | (190,772) | ||
Incremental costs at end of period | 255,391 | 255,391 | |
Current | 170,703 | 170,703 | |
Non-current | 84,688 | 84,688 | |
Cost | |||
Contract assets | |||
Contract assets at beginning of period | 193,675 | 193,675 | |
Additions | 587,733 | ||
Write-offs, net | (585,675) | ||
Contract assets at end of period | 195,733 | 195,733 | |
Current | 195,733 | 195,733 | |
Accumulated depreciation / amortization | |||
Contract assets | |||
Contract assets at beginning of period | R$ 33196 | (33,196) | |
Additions | (512) | ||
Contract assets at end of period | (33,708) | (33,708) | |
Current | R$ 33708 | R$ 33708 |
BASIS OF PREPARATION AND PRES_5
BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS - Contractual liabilities and Leases - (Details) - BRL (R$) R$ in Thousands | Jan. 01, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Contractual liabilities | |||
Contract liabilities | R$ 532207 | R$ 178897 | |
Minimum | |||
Contractual liabilities | |||
Rights-of-use assets | R$ 8400000 | ||
Maximum | |||
Contractual liabilities | |||
Rights-of-use assets | R$ 9200000 | ||
2,019 | |||
Contractual liabilities | |||
Contract liabilities | (504,473) | ||
2,020 | |||
Contractual liabilities | |||
Contract liabilities | (16,753) | ||
2,021 | |||
Contractual liabilities | |||
Contract liabilities | (2,383) | ||
2022 onwards | |||
Contractual liabilities | |||
Contract liabilities | R$ 8598 |
CASH AND CASH EQUIVALENTS (Deta
CASH AND CASH EQUIVALENTS (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
CASH AND CASH EQUIVALENTS | ||||
Cash and banks | R$ 205598 | R$ 117799 | ||
Short-term investments | 3,175,730 | 3,932,539 | ||
Total | R$ 3381328 | R$ 4050338 | R$ 5105110 | R$ 5336845 |
TRADE ACCOUNTS RECEIVABLE (Deta
TRADE ACCOUNTS RECEIVABLE (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Trade accounts receivables | ||
Billed amounts | R$ 6789257 | R$ 6753621 |
Unbilled amounts | 2,454,810 | 2,481,364 |
Interconnection amounts | 835,887 | 859,819 |
Amounts from related parties (Note 28) | 148,814 | 201,021 |
Trade accounts receivable | 8,730,634 | 8,862,354 |
Current | 8,304,382 | 8,588,466 |
Noncurrent | 426,252 | 273,888 |
Cost | ||
Trade accounts receivables | ||
Trade accounts receivable | 10,228,768 | 10,295,825 |
Estimated losses for impairment or obsolescence | ||
Trade accounts receivables | ||
Trade accounts receivable | R$ 1498134 | R$ 1433471 |
TRADE ACCOUNTS RECEIVABLE - Non
TRADE ACCOUNTS RECEIVABLE - Noncurrent trade accounts receivable (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Non-current trade accounts receivable | ||
Resale of good to other entities | R$ 160979 | R$ 122651 |
Impact of the present-value adjustment on resale of good to other entities | 16,672 | 16,011 |
Soluciona TI | ||
Non-current trade accounts receivable | ||
Noncurrent receivable form related parties | 171,839 | 106,206 |
Impact of the present-value adjustment on resale of good to legal entities | 41,455 | 33,614 |
OI group | ||
Non-current trade accounts receivable | ||
Accounts receivable from negotiations on the bankruptcy | 93,434 | 45,031 |
Present-value adjustment on accounts receivable arising from negotiations on the bankruptcy | R$ 25931 | R$ 15535 |
TRADE ACCOUNTS RECEIVABLE, NET
TRADE ACCOUNTS RECEIVABLE, NET - Current and non current trade accounts receivable (Details) - Soluciona TI - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
TRADE ACCOUNTS RECEIVABLE | ||
Deferred financial income | R$ 41455 | R$ 33614 |
Noncurrent | 171,839 | 106,206 |
Trade accounts receivable | ||
TRADE ACCOUNTS RECEIVABLE | ||
Nominal amount receivable | 573,094 | 434,743 |
Deferred financial income | (53,424) | (33,614) |
Present value of accounts receivable | 519,670 | 401,129 |
Estimated impairment losses | (196,435) | (154,666) |
Net amount receivable | 323,235 | 246,463 |
Current | 151,396 | 140,257 |
Noncurrent | R$ 171839 | R$ 106206 |
TRADE ACCOUNTS RECEIVABLE, NE_2
TRADE ACCOUNTS RECEIVABLE, NET - Aging list of gross trade accounts receivable (Details) - Soluciona TI - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
TRADE ACCOUNTS RECEIVABLE | ||
Unsecured residual values resulting in benefits to the lessor | R$ 0 | |
Contingent payments recognized as revenue | 0 | |
Trade accounts receivable | ||
TRADE ACCOUNTS RECEIVABLE | ||
Nominal amount receivable | 573,094 | R$ 434743 |
Present value of accounts receivable | 519,670 | R$ 401129 |
Trade accounts receivable | 2019 | ||
TRADE ACCOUNTS RECEIVABLE | ||
Nominal amount receivable | 279,563 | |
Present value of accounts receivable | 267,595 | |
Trade accounts receivable | From 1 to 5 years | ||
TRADE ACCOUNTS RECEIVABLE | ||
Nominal amount receivable | 293,531 | |
Present value of accounts receivable | R$ 252075 |
TRADE ACCOUNTS RECEIVABLE, NE_3
TRADE ACCOUNTS RECEIVABLE, NET - Aging list of trade accounts receivable (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Aging list of trade accounts receivable | ||
Trade accounts receivable | R$ 8730634 | R$ 8862354 |
Falling due | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | 6,485,154 | 6,635,125 |
Overdue - 1 to 30 days | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | 1,096,639 | 1,132,008 |
Overdue - 31 to 60 days | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | 305,019 | 375,176 |
Overdue - 61 to 90 days | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | 200,401 | 232,648 |
Overdue - 91 to 120 days | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | 220,221 | 105,342 |
Overdue - over 120 days | ||
Aging list of trade accounts receivable | ||
Trade accounts receivable | R$ 423200 | R$ 382055 |
TRADE ACCOUNTS RECEIVABLE, NE_4
TRADE ACCOUNTS RECEIVABLE, NET - Estimated impairment losses for accounts receivable (Details) - Trade accounts receivable - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Estimated impairment losses for accounts receivable roll forward | ||
Balance at beginning | R$ 1433471 | R$ 1399895 |
Initial adoption IFRS 9 on 01.01.18 | (364,456) | |
Supplement to estimated losses, net of resersal (Note 25) | (1,533,660) | (1,481,015) |
Write-off due to use | 1,833,453 | 1,456,158 |
Business combinations (Note 1.c.2) | (8,719) | |
Balance at ending | R$ 1498134 | R$ 1433471 |
INVENTORIES (Details)
INVENTORIES (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
INVENTORIES | ||
Total | R$ 462053 | R$ 348755 |
Cost | ||
INVENTORIES | ||
Materials for resale | 413,843 | 325,850 |
Materials for consumption | 61,819 | 57,740 |
Other inventories | 30,013 | 7,822 |
Total | 505,675 | 391,412 |
Estimated losses for impairment or obsolescence | ||
INVENTORIES | ||
Total | R$ 43622 | R$ 42657 |
PREPAID EXPENSES (Details)
PREPAID EXPENSES (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
PREPAID EXPENSES | ||
Advertising and publicity | R$ 252900 | R$ 336295 |
Insurance | 24,867 | 36,941 |
Rental | 32,792 | 29,713 |
Software and networks maintenance | 17,485 | 12,375 |
Incremental costs - IFRS 15 (Note 2.f) | 255,391 | |
Financial charges | 43,853 | 2,592 |
Personal | 33,970 | 28,178 |
Taxes and other | 54,717 | 23,461 |
Total | 715,975 | 469,555 |
Current | 581,743 | 446,439 |
Noncurrent | R$ 134232 | R$ 23116 |
INCOME AND SOCIAL CONTRIBUTIO_2
INCOME AND SOCIAL CONTRIBUTION TAXES - Income and Social Contribution taxes recoverable (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
INCOME AND SOCIAL CONTRIBUTION TAXES | ||
Income taxes recoverable | R$ 245883 | R$ 428524 |
Social contribution taxes recoverable | 28,706 | 77,011 |
Total | R$ 274589 | R$ 505535 |
INCOME AND SOCIAL CONTRIBUTIO_3
INCOME AND SOCIAL CONTRIBUTION TAXES - Income and Social Contribution taxes payable (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
INCOME AND SOCIAL CONTRIBUTION TAXES | ||
Income taxes payable | R$ 8756 | R$ 3267 |
Social contribution taxes payable | 3,253 | 1,212 |
Total | R$ 12009 | R$ 4479 |
INCOME AND SOCIAL CONTRIBUTIO_4
INCOME AND SOCIAL CONTRIBUTION TAXES - Deferred taxes (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | R$ 337917 | R$ 27497 | |
Income statement | (1,516,747) | (541,405) | |
Comprehensive income | 31,797 | 58,192 | |
Other | 70,012 | (86) | |
Business combinations (Note 1.c.2) | 117,885 | ||
Balance at ending | (1,752,855) | (337,917) | |
Deferred tax assets | 5,569,885 | 5,288,176 | R$ 4541952 |
Deferred tax liabilities | (7,322,740) | (5,626,093) | (4,514,455) |
Net deferred tax assets | 230,097 | 371,408 | R$ 27497 |
Deferred tax liabilities | (1,982,952) | R$ 709325 | |
Percentage of tax bases limit used to offset tax losses | 30.00% | ||
Deferred tax credits (income and social contribution tax losses) were not recognized in indirect subsidiaries | 12,649 | R$ 11938 | |
Income and social contribution taxes on tax losses | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 793,933 | 14,071 | |
Income statement | 634,543 | 710,411 | |
Business combinations (Note 1.c.2) | 69,451 | ||
Balance at ending | 1,428,476 | 793,933 | |
Income and social contribution taxes on temporary differences | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | (1,131,850) | 13,426 | |
Income statement | (2,151,290) | (1,251,816) | |
Comprehensive income | 31,797 | 58,192 | |
Other | (86) | ||
Business combinations (Note 1.c.2) | 48,434 | ||
Effects of the initial adoption of IFRS 9 and IFRS 15 | 70,012 | ||
Balance at ending | (3,181,331) | (1,131,850) | |
Provisions for legal, labor, tax civil and regulatory contingencies | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 2,298,735 | 2,230,336 | |
Income statement | (333,035) | 68,399 | |
Balance at ending | 1,965,700 | 2,298,735 | |
Trade accounts payable and other provisions | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 651,417 | 677,123 | |
Income statement | (79,683) | (25,706) | |
Balance at ending | 571,734 | 651,417 | |
Estimated losses on impairment of accounts receivable | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 434,960 | 358,805 | |
Income statement | (115,661) | 76,155 | |
Effects of the initial adoption of IFRS 9 and IFRS 15 | 122,977 | ||
Balance at ending | 442,276 | 434,960 | |
Customer portfolio and trademarks | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 254,418 | 313,092 | |
Income statement | (69,815) | (58,674) | |
Balance at ending | 184,603 | 254,418 | |
Estimated losses from modems and other P&E items | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 200,941 | 284,677 | |
Income statement | (24,811) | (83,736) | |
Balance at ending | 176,130 | 200,941 | |
Pension plans and other post-employment benefits | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 174,534 | 108,419 | |
Income statement | 20,934 | 8,630 | |
Comprehensive income | 30,753 | 57,485 | |
Balance at ending | 226,221 | 174,534 | |
Profit sharing | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 110,046 | 125,256 | |
Income statement | 19,643 | (15,210) | |
Balance at ending | 129,689 | 110,046 | |
Provision for loyalty program | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 17,121 | 19,112 | |
Income statement | 1,031 | (1,991) | |
Balance at ending | 18,152 | 17,121 | |
Accelerated accounting depreciation | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 8,260 | 24,033 | |
Income statement | (7,873) | (15,773) | |
Balance at ending | 387 | 8,260 | |
Estimated impairment losses on inventories | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 11,752 | 12,099 | |
Income statement | (2,481) | (347) | |
Balance at ending | 9,271 | 11,752 | |
Derivative transactions | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 25,871 | 60,133 | |
Income statement | 78,028 | (35,084) | |
Comprehensive income | 832 | 822 | |
Balance at ending | 104,731 | 25,871 | |
Licenses | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | (1,636,886) | (1,420,556) | |
Income statement | (216,328) | (216,330) | |
Balance at ending | (1,853,214) | (1,636,886) | |
Goodwill (Spanish e Navytree, Vivo Part. and GVTPart.) | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | (3,598,172) | (2,729,203) | |
Income statement | (1,002,768) | (868,969) | |
Balance at ending | (4,600,940) | (3,598,172) | |
Property, plant and equipment of small value | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Income statement | (395,606) | ||
Balance at ending | (395,606) | ||
Technological Innovation Law | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | (97,533) | (140,940) | |
Income statement | 47,406 | 43,407 | |
Balance at ending | (50,127) | (97,533) | |
Other temporary differences | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Balance at beginning | 12,686 | 91,040 | |
Income statement | (70,271) | (126,587) | |
Comprehensive income | 212 | (115) | |
Other | (86) | ||
Business combinations (Note 1.c.2) | 48,434 | ||
Effects of the initial adoption of IFRS 9 and IFRS 15 | (52,965) | ||
Balance at ending | R$ 110338 | R$ 12686 |
INCOME AND SOCIAL CONTRIBUTIO_5
INCOME AND SOCIAL CONTRIBUTION TAXES - Projections (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | R$ 1752855 | R$ 337917 | R$ 27497 |
2,019 | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | 2,082,829 | ||
2,020 | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | (555,161) | ||
2,021 | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | 494,257 | ||
2,022 | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | 1,002,778 | ||
2,023 | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | 259,562 | ||
Over five years | |||
DEFERRED TAXES AND TAXES RECOVERABLE | |||
Total | R$ 6147442 |
INCOME AND SOCIAL CONTRIBUTIO_6
INCOME AND SOCIAL CONTRIBUTION TAXES - Reconciliation of income tax and social contribution expense (Details) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018BRL (R$) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | |
INCOME AND SOCIAL CONTRIBUTION TAXES | |||
Statutory tax rate | 34 | 34 | |
Income tax rate | 25.00% | 25.00% | |
Social contribution tax rate | 9.00% | 9.00% | |
Income before taxes | R$ 11277490 | R$ 5730773 | R$ 5134722 |
Income and social contribution tax expenses, at the tax rate of 34% | (3,834,347) | (1,948,463) | (1,745,805) |
Equity pickup, net of effects from interest on equity received and surplus value of the assets purchased attributed to the Company (Note 12) | (1,988) | 537 | 423 |
Unclaimed interest on equity | (14,426) | (21,843) | (11,432) |
Temporary differences in subsidiaries | 2,007 | ||
Non-deductible expenses, gifts, incentives | (76,671) | (94,413) | (88,916) |
Deferred taxes recognized in subsidiaries on tax loss carryforwards, negative basis and temporary differences referring to prior years | 132,080 | ||
Tax benefit related to interest on equity allocated | 1,547,000 | 821,657 | 738,529 |
Other (additions) exclusions | 31,200 | (13,545) | 57,721 |
Tax debits | R$ 2349232 | R$ 1121983 | R$ 1049480 |
Effective rate | 20.8 | 19.6 | 20.4 |
Current income and social contribution taxes | R$ 832485 | R$ 580578 | R$ 288063 |
Deferred income and social contribution taxes | R$ 1516747 | R$ 541405 | R$ 761417 |
TAXES, CHARGES AND CONTRIBUTI_5
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | ||
State VAT (ICMS) | R$ 2549006 | R$ 2450856 |
Withholding taxes and contributions | 129,741 | 238,355 |
PIS and COFINS | 5,000,677 | 85,098 |
Fistel, INSS, ISS and other taxes | 217,056 | 27,431 |
Total | 7,896,480 | 2,801,740 |
Current | 4,674,218 | 2,058,455 |
Non-current | R$ 3222262 | 743,285 |
Tax credits offsetting period | 48 months | |
Deferred tax credits from acquisition of property and equipment | R$ 509920 | R$ 423588 |
Tax credits from PIS and COFINS | 4,915,239 | |
Current tax credits from PIS and COFINS | 2,520,990 | |
Non-current tax credits from PIS and COFINS | 2,394,249 | |
Minimum | ||
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | ||
Contingent assets from in-progress lawsuits | 1,700,000 | |
Maximum | ||
TAXES, CHARGES AND CONTRIBUTIONS RECOVERABLE | ||
Contingent assets from in-progress lawsuits | R$ 2200000 |
JUDICIAL DEPOSITS AND GARNISH_3
JUDICIAL DEPOSITS AND GARNISHMENTS - Judicial Deposits and garnishments (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
JUDICIAL DEPOSITS AND GARNISHMENTS | ||
Tax | R$ 1929594 | R$ 4230917 |
Labor | 522,201 | 885,338 |
Civil | 1,164,835 | 1,205,807 |
Regulatory | 208,447 | 200,627 |
Total | 3,825,077 | 6,522,689 |
Garnishments | 84,937 | 141,116 |
Total | 3,910,014 | 6,663,805 |
Current | 313,007 | 324,638 |
Non current | R$ 3597007 | R$ 6339167 |
JUDICIAL DEPOSITS AND GARNISH_4
JUDICIAL DEPOSITS AND GARNISHMENTS - Tax related judicial Deposits (Details) - BRL (R$) R$ in Thousands | 3 Months Ended | |||
Sep. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | R$ 1929594 | R$ 4230917 | ||
Contribution to Empresa Brasil de Comunicacao (EBC) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 1,238,068 | |||
Deposit converted into income | R$ 1378170 | |||
Telecommunications Inspection Fund (FISTEL) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 44,771 | 1,161,061 | ||
Deposit withdrawn by the company | R$ 1126810 | |||
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 551,937 | 518,474 | ||
Universal Telecommunication Services Fund (FUST) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 503,246 | 484,649 | ||
Social Contribution Tax for Intervention in the Economic Order (CIDE) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 278,685 | 270,612 | ||
State Value-Added Tax (ICMS) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 239,220 | 273,264 | ||
Social Security, work accident insurance (SAT) and funds to third parties (INSS) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 141,759 | 134,688 | ||
Withholding Income Tax (IRRF) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 55,425 | 45,846 | ||
Contribution tax on gross revenue for Social Integration Program (PIS) and for Social Security Financing (COFINS) | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | 39,672 | 37,965 | ||
Other taxes, charges and contributions | ||||
JUDICIAL DEPOSITS AND GARNISHMENTS | ||||
Judicial tax deposits | R$ 74879 | R$ 66290 |
OTHER ASSETS (Details)
OTHER ASSETS (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
OTHER ASSETS | ||
Advances to employees and suppliers | R$ 83094 | R$ 58456 |
Related-party receivables (Note 28) | 120,776 | 166,733 |
Receivables from suppliers | 114,175 | 114,015 |
Surplus from post-employment benefit plans (Note 30) | 10,997 | 9,833 |
Other amounts receivable | 20,670 | 61,295 |
Total | 349,712 | 410,332 |
Current | 302,607 | 321,397 |
Noncurrent | R$ 47105 | R$ 88935 |
INVESTMENTS (Details)
INVESTMENTS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
INVESTMENTS | ||||
Current assets | R$ 18362992 | R$ 16731666 | ||
Noncurrent assets | 84,198,326 | 84,651,169 | ||
TOTAL ASSETS | 102,561,318 | 101,382,835 | ||
Current liabilities | 17,160,820 | 17,862,531 | ||
Non-current liabilities | 13,793,471 | 14,058,946 | ||
Equity | 71,607,027 | 69,461,358 | R$ 69244419 | R$ 68567242 |
TOTAL LIABILITIES AND EQUITY | 102,561,318 | 101,382,835 | ||
Investment Book value | 101,657 | 98,902 | 85,745 | |
Net operating income | 43,462,740 | 43,206,832 | 42,508,459 | |
Operating costs and expenses | (36,457,478) | (35,852,109) | (36,071,766) | |
Financial income (expenses), net | 1,827,153 | (903,044) | (1,234,541) | |
Income and social contribution taxes | (2,349,232) | (1,121,983) | (1,049,480) | |
Net income for the year | 8,928,258 | 4,608,790 | 4,085,242 | |
Equity pickup, according to interest held | R$ 5847 | R$ 1580 | 1,244 | |
Alianca / AIX / ACT | ||||
INVESTMENTS | ||||
Ownership interest in joint ventures (as a percent) | 50.00% | 50.00% | ||
Current assets | R$ 213481 | R$ 189988 | ||
Noncurrent assets | 12,327 | 13,410 | ||
TOTAL ASSETS | 225,808 | 203,398 | ||
Current liabilities | 7,103 | 4,143 | ||
Non-current liabilities | 16,101 | 4,811 | ||
Equity | 202,604 | 194,444 | ||
TOTAL LIABILITIES AND EQUITY | 225,808 | 203,398 | ||
Investment Book value | 101,302 | 97,222 | ||
Net operating income | 45,608 | 45,704 | 42,919 | |
Operating costs and expenses | (58,773) | (43,571) | (41,987) | |
Financial income (expenses), net | 1,334 | 1,713 | 2,021 | |
Income and social contribution taxes | 137 | (686) | (465) | |
Net income for the year | (11,694) | 3,160 | 2,488 | |
Equity pickup, according to interest held | R$ 5847 | R$ 1580 | R$ 1244 |
INVESTMENTS - Changes in invest
INVESTMENTS - Changes in investments (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
INVESTMENTS | |||
Balances at beginning of the period | R$ 98902 | R$ 85745 | |
Equity pickup | (5,847) | 1,580 | R$ 1244 |
Provision for losses on investments | (700) | ||
Other comprehensive income | 9,302 | 11,577 | |
Balances at end of the period | 101,657 | 98,902 | 85,745 |
Other investments | |||
INVESTMENTS | |||
Balances at beginning of the period | 1,680 | 1,342 | |
Provision for losses on investments | (700) | ||
Other comprehensive income | (625) | 338 | |
Balances at end of the period | 355 | 1,680 | 1,342 |
Joint ventures | |||
INVESTMENTS | |||
Balances at beginning of the period | 97,222 | 84,403 | |
Equity pickup | (5,847) | 1,580 | |
Other comprehensive income | 9,927 | 11,239 | |
Balances at end of the period | R$ 101302 | R$ 97222 | R$ 84403 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | R$ 33222316 | R$ 31924918 |
Additions | 6,964,798 | 6,583,574 |
Write-offs, net | (40,193) | 35,650 |
Net transfers | (186,308) | (19,209) |
Depreciation (Note 24) | (5,845,286) | (5,309,664) |
Business Combination (Note 1.c.1) | 7,047 | |
Balance at end of the period | 34,115,327 | 33,222,316 |
Estimated losses for impairment or obsolescence | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (228,052) | (485,575) |
Additions | (8,975) | (37,374) |
Write-offs, net | 80,135 | 162,319 |
Net transfers | 132,578 | |
Balance at end of the period | (156,892) | (228,052) |
Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 114,335,288 | |
Balance at end of the period | 120,456,916 | 114,335,288 |
Accumulated depreciation / amortization | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (81,112,972) | |
Balance at end of the period | (86,341,589) | (81,112,972) |
Switching and transmission equipment | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 22,809,109 | 22,231,874 |
Additions | 10,670 | 42,999 |
Write-offs, net | (45,719) | (88,766) |
Net transfers | 5,380,744 | 3,634,293 |
Depreciation (Note 24) | (3,486,592) | (3,011,291) |
Balance at end of the period | 24,668,212 | 22,809,109 |
Switching and transmission equipment | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 74,100,056 | |
Balance at end of the period | 79,002,102 | 74,100,056 |
Switching and transmission equipment | Accumulated depreciation / amortization | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (51,290,947) | |
Balance at end of the period | (54,333,890) | (51,290,947) |
Terminal equipment / modems | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 2,724,332 | 2,588,307 |
Additions | 129,640 | 141,132 |
Write-offs, net | (1,721) | (7,602) |
Net transfers | 1,098,380 | 1,471,431 |
Depreciation (Note 24) | (1,379,547) | (1,468,936) |
Balance at end of the period | 2,571,084 | 2,724,332 |
Terminal equipment / modems | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 16,845,903 | |
Balance at end of the period | 18,033,246 | 16,845,903 |
Terminal equipment / modems | Accumulated depreciation / amortization | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (14,121,571) | |
Balance at end of the period | (15,462,162) | (14,121,571) |
Infrastructure | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 3,885,297 | 3,725,207 |
Additions | 101,798 | 91,160 |
Write-offs, net | (8,461) | (6,966) |
Net transfers | 449,369 | 619,008 |
Depreciation (Note 24) | (658,915) | (544,454) |
Business Combination (Note 1.c.1) | 1,342 | |
Balance at end of the period | 3,769,088 | 3,885,297 |
Infrastructure | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 15,728,808 | |
Balance at end of the period | 16,154,562 | 15,728,808 |
Infrastructure | Accumulated depreciation / amortization | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (11,843,511) | |
Balance at end of the period | (12,385,474) | (11,843,511) |
Land | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 314,353 | 315,719 |
Additions | 550 | 550 |
Write-offs, net | (71) | (1,916) |
Balance at end of the period | 314,832 | 314,353 |
Land | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 314,353 | |
Balance at end of the period | 314,832 | 314,353 |
Other P&E | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 830,452 | 819,356 |
Additions | 204,041 | 259,620 |
Write-offs, net | (2,926) | (2,522) |
Net transfers | 124,772 | 34,093 |
Depreciation (Note 24) | (320,232) | (284,983) |
Business Combination (Note 1.c.1) | 4,888 | |
Balance at end of the period | 836,107 | 830,452 |
Other P&E | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 4,687,395 | |
Balance at end of the period | 4,996,170 | 4,687,395 |
Other P&E | Accumulated depreciation / amortization | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | (3,856,943) | |
Balance at end of the period | (4,160,063) | (3,856,943) |
Assets and facilities under construction | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 2,886,825 | 2,730,030 |
Additions | 6,527,074 | 6,085,487 |
Write-offs, net | (61,430) | (18,897) |
Net transfers | (7,239,573) | (5,910,612) |
Business Combination (Note 1.c.1) | 817 | |
Balance at end of the period | 2,112,896 | 2,886,825 |
Assets and facilities under construction | Cost | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Balance at beginning of the period | 2,886,825 | |
Balance at end of the period | R$ 2112896 | R$ 2886825 |
Minimum | Switching and transmission equipment | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 2.50% | |
Minimum | Terminal equipment / modems | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 6.67% | |
Minimum | Infrastructure | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 2.50% | |
Minimum | Other P&E | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 10.00% | |
Maximum | Switching and transmission equipment | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 25.00% | |
Maximum | Terminal equipment / modems | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 66.67% | |
Maximum | Infrastructure | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 66.67% | |
Maximum | Other P&E | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Annual depreciation rate | 25.00% |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - Depreciation rates (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Property and equipment pledged in guarantee | R$ 94641 | R$ 176591 |
Estimated residual value of reversible assets | 8,621,863 | R$ 8763355 |
Depreciation rate accounting estimates | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Increased depreciation expense | R$ 267657 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 43331904 | R$ 44483496 |
Additions | 1,226,126 | 1,377,382 |
Write-offs, net | (16) | (3,376) |
Net transfers | 186,308 | 19,209 |
Amortization (Note 25) | (2,523,337) | (2,545,337) |
Business combination (Note 1.c.2) | 530 | |
Balance at end of the period | 42,220,985 | 43,331,904 |
Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 65,341,542 | |
Balance at end of the period | 66,743,503 | 65,341,542 |
Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (22,009,638) | |
Balance at end of the period | (24,522,518) | (22,009,638) |
Software | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 2,720,806 | 2,694,521 |
Additions | 970,172 | 276,390 |
Write-offs, net | (16) | (7,427) |
Net transfers | 519,539 | 701,545 |
Amortization (Note 25) | (965,459) | (944,753) |
Business combination (Note 1.c.2) | 530 | |
Balance at end of the period | R$ 3245042 | 2,720,806 |
Software | Minimum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 20.00% | |
Software | Maximum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 50.00% | |
Software | Estimated losses for impairment or obsolescence | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 499 | (4,581) |
Write-offs, net | 4,051 | |
Net transfers | 31 | |
Balance at end of the period | (499) | (499) |
Software | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 15,125,532 | |
Balance at end of the period | 16,604,769 | 15,125,532 |
Software | Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (12,404,726) | |
Balance at end of the period | (13,359,727) | (12,404,726) |
Customer portfolio | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 1,978,863 | 2,561,220 |
Amortization (Note 25) | (549,589) | (582,357) |
Balance at end of the period | R$ 1429274 | 1,978,863 |
Customer portfolio | Minimum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 11.76% | |
Customer portfolio | Maximum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 12.85% | |
Customer portfolio | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 4513278 | |
Balance at end of the period | 4,513,278 | 4,513,278 |
Customer portfolio | Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (2,534,415) | |
Balance at end of the period | (3,084,004) | (2,534,415) |
Trademarks | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 1,073,615 | 1,157,820 |
Amortization (Note 25) | (84,205) | (84,205) |
Balance at end of the period | R$ 989410 | 1,073,615 |
Trademarks | Minimum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 5.13% | |
Trademarks | Maximum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 66.67% | |
Trademarks | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 1658897 | |
Balance at end of the period | 1,658,897 | 1,658,897 |
Trademarks | Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (585,282) | |
Balance at end of the period | (669,487) | (585,282) |
Licenses | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 13,969,606 | 14,897,968 |
Additions | 6,647 | |
Amortization (Note 25) | (920,116) | (928,362) |
Balance at end of the period | R$ 13056137 | 13,969,606 |
Licenses | Minimum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 3.60% | |
Licenses | Maximum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 6.67% | |
Licenses | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 20237572 | |
Balance at end of the period | 20,244,219 | 20,237,572 |
Licenses | Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (6,267,966) | |
Balance at end of the period | (7,188,082) | (6,267,966) |
Other intangible assets | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 20,952 | 50,702 |
Additions | 207 | |
Net transfers | 32,539 | (24,297) |
Amortization (Note 25) | (3,968) | (5,660) |
Balance at end of the period | R$ 49523 | 20,952 |
Other intangible assets | Minimum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 6.67% | |
Other intangible assets | Maximum | ||
INTANGIBLE ASSETS | ||
Annual amortization rate (%) | 20.00% | |
Other intangible assets | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | R$ 238201 | |
Balance at end of the period | 270,741 | 238,201 |
Other intangible assets | Accumulated depreciation / amortization | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | (217,249) | |
Balance at end of the period | (221,218) | (217,249) |
Software under development | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 506,140 | 63,425 |
Additions | 249,307 | 1,100,785 |
Net transfers | (365,770) | (658,070) |
Balance at end of the period | 389,677 | 506,140 |
Software under development | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 506,140 | |
Balance at end of the period | 389,677 | 506,140 |
Goodwill | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 23,062,421 | 23,062,421 |
Balance at end of the period | 23,062,421 | 23,062,421 |
Goodwill | Cost | ||
INTANGIBLE ASSETS | ||
Balance at beginning of the period | 23,062,421 | |
Balance at end of the period | R$ 23062421 | R$ 23062421 |
INTANGIBLE ASSETS - Goodwill br
INTANGIBLE ASSETS - Goodwill breakdown (Details) R$ in Thousands | Dec. 31, 2018BRL (R$) |
INTANGIBLE ASSETS | |
Goodwill | R$ 23062421 |
Ajato Telecomunicacao Ltda. | |
INTANGIBLE ASSETS | |
Goodwill | 149 |
Spanish and Figueira, by the merger of Telefonica Data Brasil Holding (TDBH) in 2006 | |
INTANGIBLE ASSETS | |
Goodwill | 212,058 |
Santo Genovese Participacoes, Atrium Telecomunicacoes, which took place in 2004 | |
INTANGIBLE ASSETS | |
Goodwill | 71,892 |
Telefonica Televisao Participacoes, former Navytree, occurred in 2008 | |
INTANGIBLE ASSETS | |
Goodwill | 780,693 |
Vivo Participacoes, occurred in 2011 | |
INTANGIBLE ASSETS | |
Goodwill | 9,160,488 |
GVT Participacoes, occurred in 2015 | |
INTANGIBLE ASSETS | |
Goodwill | R$ 12837141 |
IMPAIRMENT OF NONFINANCIAL AS_3
IMPAIRMENT OF NONFINANCIAL ASSETS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
IMPAIRMENT OF NONFINANCIAL ASSETS | ||
Period of assessment of value of goodwill | 5 years | 5 years |
Growth rate | 4.50% | 4.50% |
Discount rate applied to cash flow projections | 13.99% | 13.58% |
Inflation rate | 4.00% | 4.00% |
Impairment loss | R$ 0 | R$ 0 |
Minimum | ||
IMPAIRMENT OF NONFINANCIAL ASSETS | ||
Discount rate | (1.00%) | (1.00%) |
Perpetuity growth rates | (0.50%) | (0.50%) |
OIBDA Margin | (2.00%) | (2.00%) |
Capex/Revenues Margin | (1.50%) | (1.50%) |
Maximum | ||
IMPAIRMENT OF NONFINANCIAL ASSETS | ||
Discount rate | 1.00% | 1.00% |
Perpetuity growth rates | 0.50% | 0.50% |
OIBDA Margin | 2.00% | 2.00% |
Capex/Revenues Margin | 1.50% | 1.50% |
PERSONNEL, SOCIAL CHARGES AND_3
PERSONNEL, SOCIAL CHARGES AND BENEFITS (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
PERSONNEL, SOCIAL CHARGES AND BENEFITS | ||
Salaries and wages | R$ 34767 | R$ 40171 |
Social charges and benefits | 385,695 | 399,229 |
Profit sharing | 265,433 | 273,384 |
Share-based payment plans (Note 29) | 22,638 | 33,880 |
Other compensation | 86,000 | |
Total | 794,533 | 746,664 |
Current | 782,630 | 723,380 |
Noncurrent | R$ 11903 | R$ 23284 |
TRADE ACCOUNTS PAYABLE (Details
TRADE ACCOUNTS PAYABLE (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
TRADE ACCOUNTS PAYABLE | ||
Sundry suppliers (Opex, Capex, services and Material) | R$ 6790882 | R$ 6683503 |
Amounts payable (operators, co-billing) | 198,942 | 187,976 |
Payables for purchase of non-current assets | 269,446 | 224,777 |
Related parties (Note 28) | 383,512 | 350,844 |
Total | R$ 7642782 | R$ 7447100 |
TAXES, CHARGES AND CONTRIBUTI_6
TAXES, CHARGES AND CONTRIBUTIONS (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
TAXES, CHARGES AND CONTRIBUTIONS | ||
ICMS | R$ 1094769 | R$ 1149137 |
PIS and COFINS | 512,714 | 419,589 |
Fust and Funttel | 89,794 | 93,869 |
ISS, CIDE and other taxes | 139,933 | 113,689 |
Total | 1,837,210 | 1,776,284 |
Current | 1,797,965 | 1,726,836 |
Noncurrent | R$ 39245 | R$ 49448 |
DIVIDENDS AND INTEREST ON EQU_3
DIVIDENDS AND INTEREST ON EQUITY (IOE) - Breakdown (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Dividends and interest on equity payable | |||
Withholding tax rate (as a percent) | 15.00% | ||
Dividends and interest on equity | R$ 4172916 | R$ 2396116 | R$ 2195031 |
Equity attributable to owners of parent [member] | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | 4,172,916 | 2,396,116 | |
Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.) | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | 952,217 | 505,750 | |
Telefonica | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | 1,146,619 | 609,003 | |
SP Telecomunicacoes Participacoes | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | 722,862 | 383,933 | |
Telefonica Chile | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | 2,015 | 1,070 | |
Non-controlling interest | |||
Dividends and interest on equity payable | |||
Dividends and interest on equity | R$ 1349203 | R$ 896360 |
DIVIDENDS AND INTEREST ON EQU_4
DIVIDENDS AND INTEREST ON EQUITY (IOE) - Changes (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
DIVIDENDS AND INTEREST ON EQUITY (IOE) | ||
Beginning Balance | R$ 2396116 | R$ 2195031 |
Supplementary dividends for previous year | 2,191,864 | 1,913,987 |
Interim dividends and interest on equity (net of IRRF) | 3,867,500 | 2,054,143 |
Unclaimed dividends and interest on equity | (152,770) | (101,778) |
Payment of dividends and interest on equity | (4,136,878) | (3,668,551) |
IRRF on shareholders exempt/immune from interest on equity | 7,084 | 3,284 |
Ending Balance | R$ 4172916 | R$ 2396116 |
PROVISIONS AND CONTINGENCIES -
PROVISIONS AND CONTINGENCIES - Breakdown of changes in provisions (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | R$ 8144750 | R$ 7809261 |
Additions (reversal), net (Note 26) | 1,098,251 | 999,419 |
Other additions (reversal) | (2,539,786) | 114,076 |
Write-offs due to payment | (1,309,566) | (1,592,864) |
Write-offs due to taxes | (66,027) | |
Monetary restatement | 865,676 | 768,011 |
Business combination (Note 1.c.2) | 112,874 | |
Balances at the closing | 6,259,325 | 8,144,750 |
Current | 377,929 | 1,434,911 |
Noncurrent | 5,881,396 | 6,709,839 |
Labor | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 980,596 | 1,382,957 |
Additions (reversal), net (Note 26) | 319,056 | 297,171 |
Other additions (reversal) | (99,372) | (492) |
Write-offs due to payment | (541,749) | (865,656) |
Monetary restatement | 121,155 | 147,334 |
Business combination (Note 1.c.2) | 19,282 | |
Balances at the closing | 779,686 | 980,596 |
Current | 245,805 | 239,229 |
Noncurrent | 533,881 | 741,367 |
Tax | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 3,579,208 | 3,129,681 |
Additions (reversal), net (Note 26) | 452,746 | 154,441 |
Other additions (reversal) | (2,443,047) | 93,596 |
Write-offs due to payment | (51,924) | (168,407) |
Write-offs due to taxes | (66,027) | |
Monetary restatement | 414,914 | 348,393 |
Business combination (Note 1.c.2) | 87,531 | |
Balances at the closing | 1,951,897 | 3,579,208 |
Noncurrent | 1,951,897 | 3,579,208 |
Civil | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 1,055,877 | 1,039,357 |
Additions (reversal), net (Note 26) | 395,631 | 438,693 |
Other additions (reversal) | (14,119) | 207 |
Write-offs due to payment | (598,294) | (551,928) |
Monetary restatement | 165,708 | 123,487 |
Business combination (Note 1.c.2) | 6,061 | |
Balances at the closing | 1,004,803 | 1,055,877 |
Current | 132,124 | 201,673 |
Noncurrent | 872,679 | 854,204 |
Regulatory | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 1,103,792 | 828,934 |
Additions (reversal), net (Note 26) | (41,837) | 198,344 |
Write-offs due to payment | (117,599) | (6,873) |
Monetary restatement | 77,860 | 83,387 |
Balances at the closing | 1,022,216 | 1,103,792 |
Current | 994,009 | |
Noncurrent | 1,022,216 | 109,783 |
Contingent liabilities (PPA) | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 845,796 | 881,745 |
Additions (reversal), net (Note 26) | (27,345) | (89,230) |
Monetary restatement | 8,824 | 53,281 |
Balances at the closing | 827,275 | 845,796 |
Noncurrent | 827,275 | 845,796 |
Provision for decommissioning | ||
PROVISIONS AND CONTINGENCIES | ||
Balances at the beginning | 579,481 | 546,587 |
Other additions (reversal) | 16,752 | 20,765 |
Monetary restatement | 77,215 | 12,129 |
Balances at the closing | 673,448 | 579,481 |
Noncurrent | R$ 673448 | R$ 579481 |
PROVISIONS AND CONTINGENCIES _2
PROVISIONS AND CONTINGENCIES - Labor provisions and contingencies (Details) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018BRL (R$) | Dec. 31, 2017BRL (R$) | Nov. 20, 2001item | |
PROVISIONS AND CONTINGENCIES | |||
Provision for Universal Telecommunications Services Fund | R$ 3701208 | R$ 4316571 | |
Provision under fund for Technological Development of Telecommunications | 618,473 | 493,867 | |
Provision for Telecommunications Inspection Fund | 2,825,543 | 2,835,735 | |
Amount of fine imposed by ANATEL lawsuit | 211,000 | ||
Interest and correction amount on fine imposed by ANATEL lawsuit | R$ 482000 | ||
Maximum | |||
PROVISIONS AND CONTINGENCIES | |||
Import duty (as a percent) | 28.00% | ||
Minimum | |||
PROVISIONS AND CONTINGENCIES | |||
Import duty (as a percent) | 4.00% | ||
Labor | |||
PROVISIONS AND CONTINGENCIES | |||
Provisions - probable losses | R$ 779686 | 980,596 | |
Provisions - possible losses | 191,398 | 261,876 | |
Increase in provisions on account of claims filed by former and outsourced employees | 116,000 | ||
Tax | |||
PROVISIONS AND CONTINGENCIES | |||
Provisions - probable losses | 1,951,897 | 3,579,208 | |
Federal | 526,943 | 502,153 | |
State | 909,547 | 231,998 | |
Municipal | 33,607 | 32,054 | |
FUST, FISTEL and EBC | 481,800 | 2,813,003 | |
Possible losses | 36,103,128 | 35,388,910 | |
Federal | 12,025,529 | 8,226,374 | |
State | 16,294,685 | 18,968,349 | |
Municipal | 637,690 | 548,014 | |
FUST, FUNTTEL and FISTEL | 7,145,224 | 7,646,173 | |
Civil | |||
PROVISIONS AND CONTINGENCIES | |||
Provisions - probable losses | 1,004,803 | 1,055,877 | |
Possible losses | 3,493,655 | 2,858,796 | |
Supplement of share proceedings | 334,877 | 324,232 | |
Relating to failure to supply services and/or products sold | 353,850 | 296,169 | |
Civil proceedings of a non-consumer nature | 316,076 | 435,476 | |
Claims at several levels, related to service rendering rights | 3,466,522 | 2,827,071 | |
Civil execution proceeding | 12,926 | 17,518 | |
Lawsuits on various administrative and legal proceedings | 14,207 | 14,207 | |
Number of wireless carriers under lawsuit | item | 23 | ||
Daily fine in case of noncompliance | R$ 10000 | ||
Percentage of charge on interconnection services | 2.00% | ||
Frequency of payment for use of SMP realted radio frequencies | 2 years | ||
Extension period for use of SMP related radio frequencies | 15 years | ||
Regulatory | |||
PROVISIONS AND CONTINGENCIES | |||
Provisions - probable losses | R$ 1022216 | 1,103,792 | |
Possible losses | R$ 6119136 | R$ 5065907 |
PROVISIONS AND CONTINGENCIES _3
PROVISIONS AND CONTINGENCIES - Guarantees (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
PROVISIONS AND CONTINGENCIES | ||
Property and equipment | R$ 94641 | R$ 176591 |
Judicial deposits and garnishments | 3,910,014 | 6,663,805 |
Letters of guarantee | 2,301,210 | 1,669,476 |
Short-term investments pledged as collateral | 76,934 | 81,486 |
Contingent liability for guarantees | ||
PROVISIONS AND CONTINGENCIES | ||
Short-term investments pledged as collateral | R$ 64461 | R$ 69764 |
LOANS, FINANCING AND DEBENTUR_3
LOANS, FINANCING AND DEBENTURES - Breakdown (Details) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018BRL (R$)installment | Dec. 31, 2017BRL (R$) | Dec. 30, 2014 | |
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 1464166 | R$ 3033441 | |
Noncurrent | 4,675,271 | 5,428,400 | |
Total | 6,139,437 | 8,461,841 | |
Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 1,367,551 | 2,891,142 | |
Noncurrent | 4,675,271 | 5,345,445 | |
Total | 6,042,822 | 8,236,587 | |
Foreign currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 96,615 | 142,299 | |
Noncurrent | 82,955 | ||
Total | 96,615 | 225,254 | |
Loans and financing | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 666,213 | 820,468 | |
Noncurrent | 819,742 | 1,456,624 | |
Total | 1,485,955 | 2,277,092 | |
Loans and financing | Foreign currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 96,615 | 142,299 | |
Noncurrent | 82,955 | ||
Total | 96,615 | 225,254 | |
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 214,012 | 371,946 | |
Noncurrent | 213,958 | ||
Total | 214,012 | 585,904 | |
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | Foreign currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 96,615 | 142,299 | |
Noncurrent | 82,955 | ||
Total | R$ 96615 | 225,254 | |
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | TJLP | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.00% | ||
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | TJLP | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 4.08% | ||
Financing - BNDES FINEM - Contract 11.2.0814.1 maturing 7/15/2019 | ECM | Foreign currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 2.38% | ||
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 184200 | 184,007 | |
Noncurrent | 122,011 | 303,560 | |
Total | R$ 306211 | 487,567 | |
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | TJLP | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.00% | ||
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 8/15/2020 | TJLP | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 3.38% | ||
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 11/15/2019 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 13403 | 14,654 | |
Noncurrent | 13,377 | ||
Total | R$ 13403 | 28,031 | |
Financing - BNDES FINEM - Contract 11.2.0963.1 maturing 11/15/2019 | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 5.00% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 103486 | 101,879 | |
Noncurrent | 316,269 | 413,552 | |
Total | R$ 419755 | 515,431 | |
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.00% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 3.12% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.00% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | TJLP | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 3.12% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 37837 | 37,061 | |
Noncurrent | 94,516 | 132,092 | |
Total | R$ 132353 | 169,153 | |
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 4.00% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 6.00% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 80014 | 70,426 | |
Noncurrent | 245,887 | 305,952 | |
Total | R$ 325901 | 376,378 | |
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 2.32% | ||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 2.32% | ||
Financing - BNDES PSI maturing 1/15/2023 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 18207 | 25,405 | |
Noncurrent | 1,263 | 19,413 | |
Total | R$ 19470 | 44,818 | |
Financing - BNDES PSI maturing 1/15/2023 | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 2.50% | ||
Financing - BNDES PSI maturing 1/15/2023 | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 5.50% | ||
Financing - BNB maturing 8/18/2022 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 15054 | 15,090 | |
Noncurrent | 39,796 | 54,720 | |
Total | R$ 54850 | 69,810 | |
Bank guarantee (in percent) | 100.00% | ||
Number of installments | installment | 3 | ||
Remaining balances | R$ 12473 | 11,722 | |
Financing - BNB maturing 8/18/2022 | Home currency | Minimum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 7.06% | ||
Financing - BNB maturing 8/18/2022 | Home currency | Maximum | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 10.00% | ||
Financing - Suppliers | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | R$ 524244 | 607,152 | |
Total | 524,244 | 607,152 | |
Debentures | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 123,961 | 1,412,486 | |
Noncurrent | 3,049,949 | 3,108,253 | |
Total | R$ 3173910 | 4,520,739 | |
4th issue - Series 3 | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 4.00% | ||
Current | R$ 41121 | 312 | |
Noncurrent | 40,010 | ||
Total | R$ 41121 | 40,322 | |
1st issue - Minas Comunica | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.50% | ||
Current | R$ 26250 | 24,088 | |
Noncurrent | 52,499 | 72,264 | |
Total | R$ 78749 | 96,352 | |
4th issue | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.68% | ||
CDI, as percentage | 100.00% | ||
Current | 1,317,513 | ||
Total | 1,317,513 | ||
5th issue | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
CDI, as percentage | 108.25% | ||
Current | R$ 51233 | 64,397 | |
Noncurrent | 1,997,694 | 1,996,517 | |
Total | R$ 2048927 | 2,060,914 | |
6th issue | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Annual interest rate (as a percent) | 0.24% | ||
CDI, as percentage | 100.00% | ||
Current | R$ 5357 | 6,176 | |
Noncurrent | 999,756 | 999,462 | |
Total | 1,005,113 | 1,005,638 | |
Finance lease | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 53,133 | 51,036 | |
Noncurrent | 339,894 | 334,424 | |
Finance lease | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Current | 53,133 | 51,036 | |
Noncurrent | 339,894 | 334,424 | |
Total | 393,027 | 385,460 | |
Contingent consideration | Home currency | |||
LOANS, FINANCING AND DEBENTURES | |||
Noncurrent | 465,686 | 446,144 | |
Total | R$ 465686 | R$ 446144 |
LOANS, FINANCING AND DEBENTUR_4
LOANS, FINANCING AND DEBENTURES - Loans and financing (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
LOANS, FINANCING AND DEBENTURES | ||
Loans and financing | R$ 6139437 | R$ 8461841 |
BNDES - PSI | ||
LOANS, FINANCING AND DEBENTURES | ||
Loans and financing | R$ 21620 | R$ 32155 |
Financing - Suppliers | Minimum | ||
LOANS, FINANCING AND DEBENTURES | ||
Net cost of CDI, as percentage | 107.90% | 101.40% |
Financing - Suppliers | Maximum | ||
LOANS, FINANCING AND DEBENTURES | ||
Net cost of CDI, as percentage | 115.90% | 109.40% |
LOANS, FINANCING AND DEBENTUR_5
LOANS, FINANCING AND DEBENTURES - Debentures (Details) R$ in Thousands | Dec. 31, 2018BRL (R$)item | Dec. 31, 2017BRL (R$)item | Jan. 26, 2017item | Jan. 13, 2017item |
4th issue - Series 3 | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Issued | 810,000 | 810,000 | ||
Outstanding | 23,557 | 23,557 | ||
Issue value | R$ | R$ 810000 | R$ 810000 | ||
1st issue - Minas Comunica | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Issued | 5,550 | 5,550 | ||
Outstanding | 5,550 | 5,550 | ||
Issue value | R$ | R$ 55500 | R$ 55500 | ||
4th issue | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Issued | 130,000 | 130,000 | ||
Outstanding | 130,000 | 130,000 | ||
Issue value | R$ | R$ 1300000 | R$ 1300000 | ||
4th, 5th and 6th issues | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Transaction cost | R$ | R$ 3951 | R$ 5422 | ||
5th issue | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Issued | 200,000 | 200,000 | 200,000 | |
Outstanding | 200,000 | 200,000 | ||
Issue value | R$ | R$ 2000000 | R$ 2000000 | ||
6th issue | ||||
LOANS, FINANCING AND DEBENTURES | ||||
Issued | 100,000 | 100,000 | 100,000 | |
Outstanding | 100,000 | 100,000 | ||
Issue value | R$ | R$ 1000000 | R$ 1000000 |
LOANS, FINANCING AND DEBENTUR_6
LOANS, FINANCING AND DEBENTURES - Finance lease and contingent consideration (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
LOANS, FINANCING AND DEBENTURES | ||
Current | R$ 1464166 | R$ 3033441 |
Noncurrent | 4,675,271 | 5,428,400 |
Finance lease | ||
LOANS, FINANCING AND DEBENTURES | ||
Nominal value payable | 766,215 | 787,147 |
Unrealized financial expenses | (373,188) | (401,687) |
Present value payable | 393,027 | 385,460 |
Current | 53,133 | 51,036 |
Noncurrent | 339,894 | 334,424 |
Unsecured residual values resulting in benefits to the lessor | R$ 0 | R$ 0 |
Contingent consideration | ||
LOANS, FINANCING AND DEBENTURES | ||
Reimbursement period | 15 years | |
2019 | Finance lease | ||
LOANS, FINANCING AND DEBENTURES | ||
Nominal value payable | R$ 60823 | |
Present value payable | 53,133 | |
From 1 to 5 years | Finance lease | ||
LOANS, FINANCING AND DEBENTURES | ||
Nominal value payable | 207,450 | |
Present value payable | 146,797 | |
Over five years | Finance lease | ||
LOANS, FINANCING AND DEBENTURES | ||
Nominal value payable | 497,942 | |
Present value payable | R$ 193097 |
LOANS, FINANCING AND DEBENTUR_7
LOANS, FINANCING AND DEBENTURES - Repayment schedule (Details) R$ in Thousands | Dec. 31, 2018BRL (R$) |
Disclosure of detailed information about borrowings [line items] | |
Repayments | R$ 4675271 |
Loans and financing | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 819,742 |
Debentures | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 3,049,949 |
Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 339,894 |
Contingent consideration | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 465,686 |
2,020 | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 1,426,486 |
2020 | Loans and financing | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 359,948 |
2020 | Debentures | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 1,025,097 |
2020 | Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 41,441 |
2,021 | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 1,293,565 |
2021 | Loans and financing | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 231,764 |
2021 | Debentures | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 1,025,097 |
2021 | Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 36,704 |
2,022 | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 1,244,893 |
2022 | Loans and financing | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 209,948 |
2022 | Debentures | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 999,755 |
2022 | Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 35,190 |
2,023 | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 51,545 |
2023 | Loans and financing | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 18,082 |
2023 | Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 33,463 |
Over five years | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 658,782 |
Over five years | Finance lease | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | 193,096 |
Over five years | Contingent consideration | |
Disclosure of detailed information about borrowings [line items] | |
Repayments | R$ 465686 |
LOANS, FINANCING AND DEBENTUR_8
LOANS, FINANCING AND DEBENTURES - Changes (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | R$ 8461841 | R$ 9224074 | |
Additions | 525,069 | 3,640,782 | |
Government grants (Note 21) | (40) | (1,581) | |
Financial charges (Note 27) | 510,398 | 932,727 | R$ 1061098 |
Issue costs | 1,471 | (4,926) | |
Foreign exchange variation (Note 27) | 28,848 | 15,846 | |
Write-offs (payments) | (3,388,150) | (5,345,081) | |
Balance at end of the period | 6,139,437 | 8,461,841 | 9,224,074 |
Loans and financing | |||
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | 2,502,346 | 4,158,015 | |
Additions | 55,876 | ||
Government grants (Note 21) | (40) | (1,581) | |
Financial charges (Note 27) | 169,771 | 300,153 | |
Foreign exchange variation (Note 27) | 28,848 | 15,846 | |
Write-offs (payments) | (1,118,355) | (2,025,963) | |
Balance at end of the period | 1,582,570 | 2,502,346 | 4,158,015 |
Debentures | |||
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | 4,520,739 | 3,554,307 | |
Additions | 3,000,000 | ||
Financial charges (Note 27) | 242,415 | 485,295 | |
Issue costs | 1,471 | (4,926) | |
Write-offs (payments) | (1,590,715) | (2,513,937) | |
Balance at end of the period | 3,173,910 | 4,520,739 | 3,554,307 |
Finance lease | |||
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | 385,460 | 374,428 | |
Additions | 18,672 | 13,462 | |
Financial charges (Note 27) | 45,501 | 45,265 | |
Write-offs (payments) | (56,606) | (47,695) | |
Balance at end of the period | 393,027 | 385,460 | 374,428 |
Financing - Suppliers | |||
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | 607,152 | 722,591 | |
Additions | 506,397 | 571,444 | |
Financial charges (Note 27) | 33,169 | 70,603 | |
Write-offs (payments) | (622,474) | (757,486) | |
Balance at end of the period | 524,244 | 607,152 | 722,591 |
Contingent consideration | |||
LOANS, FINANCING AND DEBENTURES | |||
Balance at beginning of the period | 446,144 | 414,733 | |
Financial charges (Note 27) | 19,542 | 31,411 | |
Balance at end of the period | R$ 465686 | R$ 446144 | R$ 414733 |
LOANS, FINANCING AND DEBENTUR_9
LOANS, FINANCING AND DEBENTURES - Summary of Funding and Payments (Details) R$ in Thousands | Jul. 05, 2018BRL (R$) | Nov. 13, 2017 | Jan. 26, 2017BRL (R$)item$ / item | Jan. 13, 2017BRL (R$)item$ / item | Dec. 30, 2014BRL (R$)installment | Dec. 31, 2018BRL (R$)item | Dec. 31, 2017BRL (R$)installmentitem | Dec. 31, 2016BRL (R$) |
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | R$ 525069 | R$ 3640782 | ||||||
Write-offs (payments), Principal | (2,893,219) | (4,485,495) | R$ 2171100 | |||||
Write-offs (payments), Financial charges | (494,931) | (859,586) | R$ 926223 | |||||
Write-offs (payments), Total | (3,388,150) | (5,345,081) | ||||||
Loans and financing | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | 55,876 | |||||||
Write-offs (payments), Principal | (961,687) | (1,781,261) | ||||||
Write-offs (payments), Financial charges | (156,668) | (244,702) | ||||||
Write-offs (payments), Total | (1,118,355) | (2,025,963) | ||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Credit facility | R$ 1000293 | |||||||
Annual interest rate (as a percent) | 4.00% | |||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | Minimum | TJLP | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Annual interest rate (as a percent) | 0.00% | |||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (TJLP) | Maximum | TJLP | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Annual interest rate (as a percent) | 3.12% | |||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (4% to 6%) | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Term | 7 years | |||||||
Consecutive monthly installments | installment | 60 | |||||||
Adjustment to interest rate (as a percent) | 6.00% | |||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | 15,998 | |||||||
Write-offs (payments), Principal | (946,763) | (825,256) | ||||||
Write-offs (payments), Financial charges | (152,447) | (213,752) | ||||||
Write-offs (payments), Total | (1,099,210) | (1,039,008) | ||||||
Term | 8 years | |||||||
Consecutive monthly installments | installment | 60 | |||||||
Financing - BNDES FINEM - Contract 14.2.1192.1 maturing 1/15/2023 (Selic) | Selic | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Annual interest rate (as a percent) | 2.32% | |||||||
BNB | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | 39,878 | |||||||
Write-offs (payments), Principal | (14,924) | (11,808) | ||||||
Write-offs (payments), Financial charges | (4,221) | (4,073) | ||||||
Write-offs (payments), Total | (19,145) | R$ 15881 | ||||||
Term | 8 years | |||||||
Consecutive monthly installments | installment | 72 | |||||||
BNB | Minimum | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Annual interest rate (as a percent) | 7.06% | |||||||
BNB | Maximum | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Annual interest rate (as a percent) | 10.00% | |||||||
Resolution 4131 - Scotiabank and Bank of America | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Principal | R$ 944197 | |||||||
Write-offs (payments), Financial charges | (26,877) | |||||||
Write-offs (payments), Total | (971,074) | |||||||
Debentures | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | 3,000,000 | |||||||
Write-offs (payments), Principal | (1,324,723) | (2,000,000) | ||||||
Write-offs (payments), Financial charges | (265,992) | (513,937) | ||||||
Write-offs (payments), Total | (1,590,715) | (2,513,937) | ||||||
4th issue - Series 3 | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Financial charges | (1,583) | (1,522) | ||||||
Write-offs (payments), Total | R$ 1583 | R$ 1522 | ||||||
Number of debentures | item | 810,000 | 810,000 | ||||||
1st issue - Minas Comunica | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Principal | R$ 24723 | |||||||
Write-offs (payments), Financial charges | (1,082) | |||||||
Write-offs (payments), Total | R$ 25805 | |||||||
Number of debentures | item | 5,550 | 5,550 | ||||||
1st issue - Series 1 | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Total | R$ 3012 | |||||||
1st issue - Series 2 | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Total | 8,285 | |||||||
1st issue - Series 3 | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Total | R$ 14508 | |||||||
3rd issue | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Principal | R$ 2000000 | |||||||
Write-offs (payments), Financial charges | (246,817) | |||||||
Write-offs (payments), Total | (2,246,817) | |||||||
4th issue | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Write-offs (payments), Principal | R$ 1300000 | |||||||
Write-offs (payments), Financial charges | (47,257) | (151,152) | ||||||
Write-offs (payments), Total | R$ 1347257 | R$ 151152 | ||||||
Number of debentures | item | 130,000 | 130,000 | ||||||
5th issue | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | R$ 2000000 | |||||||
Write-offs (payments), Financial charges | R$ 149795 | (114,446) | ||||||
Write-offs (payments), Total | R$ 149795 | R$ 114446 | ||||||
Term | 5 years | |||||||
Debenture | R$ 2000000 | |||||||
Number of debentures | item | 200,000 | 200,000 | 200,000 | |||||
Debenture par value | $ / item | 10 | |||||||
Accumulated variation of CDI, as a percent | 108.25% | |||||||
6th issue | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | R$ 1000000 | |||||||
Write-offs (payments), Financial charges | R$ 66275 | |||||||
Write-offs (payments), Total | R$ 66275 | |||||||
Term | 3 years | |||||||
Debenture | R$ 1000000 | |||||||
Number of debentures | item | 100,000 | 100,000 | 100,000 | |||||
Debenture par value | $ / item | 10 | |||||||
Accumulated variation of CDI, as a percent | 100.00% | |||||||
Spread | 0.24% | |||||||
Financing - Suppliers | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | R$ 506397 | R$ 571444 | ||||||
Write-offs (payments), Principal | (571,434) | (668,512) | ||||||
Write-offs (payments), Financial charges | (51,040) | (88,974) | ||||||
Write-offs (payments), Total | (622,474) | (757,486) | ||||||
Finance lease | ||||||||
LOANS, FINANCING AND DEBENTURES | ||||||||
Additions | 18,672 | 13,462 | ||||||
Write-offs (payments), Principal | (35,375) | (35,722) | ||||||
Write-offs (payments), Financial charges | (21,231) | (11,973) | ||||||
Write-offs (payments), Total | R$ 56606 | R$ 47695 |
DEFERRED INCOME (Details)
DEFERRED INCOME (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
DEFERRED INCOME | ||
Services and goods | R$ 301292 | |
Disposal of PP&E | R$ 89835 | 165,162 |
Activation revenue | 7,959 | |
Customer loyalty program | 50,354 | |
Government grants | 94,335 | 115,379 |
Contractual Liabilities - IFRS 15 | 532,207 | |
Other | 59,658 | 83,052 |
Total | 776,035 | 723,198 |
Current | 525,509 | 372,561 |
Noncurrent | 250,526 | R$ 350637 |
Reclassification to deferred income contractual liabilities | 372,167 | |
Reclassification from deferred income services and goods | 318,778 | |
Reclassification from deferred income customer loyalty program | R$ 53389 |
OTHER LIABILITIES (Details)
OTHER LIABILITIES (Details) - BRL (R$) R$ in Thousands | 1 Months Ended | ||
Jan. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
OTHER LIABILITIES | |||
Authorization licenses | R$ 124807 | R$ 258742 | |
Liabilities with related parties (Note 28) | 31,716 | 125,987 | |
Payment for license renewal | 222,143 | 167,536 | |
Third-party withholdings | 120,711 | 144,593 | |
Deficit in post-employment benefit plans (Note 30) | 679,478 | 531,938 | |
Amounts to be refunded to subscribers | 56,897 | 189,380 | |
Other liabilities | 61,957 | 72,893 | |
Total | 1,297,709 | 1,491,069 | |
Current | 368,376 | 718,468 | |
Noncurrent | R$ 929333 | R$ 772601 | |
Installment paid | R$ 142862 |
EQUITY - Capital (Details)
EQUITY - Capital (Details) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
EQUITY | ||
Authorized capital | 1,850,000,000 | |
Preferred shares | ||
EQUITY | ||
Percentage of increase in amount allocated to common share | 10.00% | 10.00% |
Number of consecutive financial years to which minimum dividend to be paid | 3 years | |
Maximum | Preferred shares | ||
EQUITY | ||
Proportion of non-vesting or restricted-voting preferred shares as percentage of total shares | 0.67% |
EQUITY - Distribution of capita
EQUITY - Distribution of capital (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
EQUITY | |||
Capital | R$ 63571416 | R$ 63571416 | |
Total shares outstanding | 1,688,693,776 | ||
Capital | |||
EQUITY | |||
Number | 1,690,984,923 | ||
Percentage of shares issued | 100.00% | ||
Capital | Controlling Group | |||
EQUITY | |||
Number | 1,244,241,119 | ||
Percentage of shares issued | 73.58% | ||
Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.) | |||
EQUITY | |||
Number | 407,279,213 | ||
Percentage of shares issued | 24.09% | ||
Capital | Telefonica | |||
EQUITY | |||
Number | 503,329,803 | ||
Percentage of shares issued | 29.76% | ||
Capital | SP Telecomunicacoes Participacoes | |||
EQUITY | |||
Number | 332,695,590 | ||
Percentage of shares issued | 19.67% | ||
Capital | Telefonica Chile | |||
EQUITY | |||
Number | 936,513 | ||
Percentage of shares issued | 0.06% | ||
Capital | Other shareholders | |||
EQUITY | |||
Number | 444,452,657 | ||
Percentage of shares issued | 26.28% | ||
Treasury shares | |||
EQUITY | |||
Number | 2,291,147 | ||
Percentage of shares issued | 0.14% | ||
Treasury Shares | (2,291,147) | (2,291,147) | (2,290,503) |
Common shares | |||
EQUITY | |||
Total shares outstanding | 569,354,053 | ||
Common shares | Capital | |||
EQUITY | |||
Number | 571,644,217 | ||
Percentage of shares issued | 100.00% | ||
Common shares | Capital | Controlling Group | |||
EQUITY | |||
Number | 540,033,264 | ||
Percentage of shares issued | 94.47% | ||
Common shares | Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.) | |||
EQUITY | |||
Number | 46,746,635 | ||
Percentage of shares issued | 8.18% | ||
Common shares | Capital | Telefonica | |||
EQUITY | |||
Number | 198,207,608 | ||
Percentage of shares issued | 34.67% | ||
Common shares | Capital | SP Telecomunicacoes Participacoes | |||
EQUITY | |||
Number | 294,158,155 | ||
Percentage of shares issued | 51.46% | ||
Common shares | Capital | Telefonica Chile | |||
EQUITY | |||
Number | 920,866 | ||
Percentage of shares issued | 0.16% | ||
Common shares | Capital | Other shareholders | |||
EQUITY | |||
Number | 29,320,789 | ||
Percentage of shares issued | 5.13% | ||
Common shares | Treasury shares | |||
EQUITY | |||
Number | 2,290,164 | ||
Percentage of shares issued | 0.40% | ||
Treasury Shares | (2,290,164) | (2,290,164) | (2,290,164) |
Preferred shares | |||
EQUITY | |||
Total shares outstanding | 1,119,339,723 | ||
Preferred shares | Capital | |||
EQUITY | |||
Number | 1,119,340,706 | ||
Percentage of shares issued | 100.00% | ||
Preferred shares | Capital | Controlling Group | |||
EQUITY | |||
Number | 704,207,855 | ||
Percentage of shares issued | 62.91% | ||
Preferred shares | Capital | Telefonica Latinoamerica Holding S.L. (former Telefonica Internacional S.A.) | |||
EQUITY | |||
Number | 360,532,578 | ||
Percentage of shares issued | 32.21% | ||
Preferred shares | Capital | Telefonica | |||
EQUITY | |||
Number | 305,122,195 | ||
Percentage of shares issued | 27.26% | ||
Preferred shares | Capital | SP Telecomunicacoes Participacoes | |||
EQUITY | |||
Number | 38,537,435 | ||
Percentage of shares issued | 3.44% | ||
Preferred shares | Capital | Telefonica Chile | |||
EQUITY | |||
Number | 15,647 | ||
Percentage of shares issued | 0.00% | ||
Preferred shares | Capital | Other shareholders | |||
EQUITY | |||
Number | 415,131,868 | ||
Percentage of shares issued | 37.09% | ||
Preferred shares | Treasury shares | |||
EQUITY | |||
Number | 983 | ||
Percentage of shares issued | 0.00% | ||
Treasury Shares | (983) | (983) | (339) |
EQUITY - Capital reserves (Deta
EQUITY - Capital reserves (Details) - BRL (R$) R$ in Thousands | Mar. 12, 2015 | Dec. 31, 2018 | Dec. 31, 2017 |
EQUITY | |||
Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (in shares) | 2,332,686 | ||
Preferred shares | |||
EQUITY | |||
Transfer of lawsuits concerning judicial proceedings (in shares) | 62 | 62 | |
Treasury shares | |||
EQUITY | |||
Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15 (in shares) | (45.26) | ||
Transfer of lawsuits concerning judicial proceedings (in shares) | 62 | ||
Treasury shares | Preferred shares | |||
EQUITY | |||
Transfer of lawsuits concerning judicial proceedings (in shares) | 62 | ||
Other capital reserves | |||
EQUITY | |||
Excess of value in the issue or capitalization | R$ 2735930 | R$ 2735930 | |
Cancelation of treasury shares according to the Special Shareholders' Meeting of 3/12/15 | (112,107) | (112,107) | |
Direct costs on capital increase (net of taxes) according to the Special Shareholders Meeting of 04/30/15 | (62,433) | (62,433) | |
Incorporation of shares of GVTPart | (1,188,707) | (1,188,707) | |
Effects of the acquisition of Lemontree and GTR by Company and Tglog by TData | (75,388) | (75,388) | |
Preferred shares delivered referring to the legal process of expansion plan | 2 | 2 | |
Total | 1,238,278 | 1,238,268 | |
Special goodwill reserve | |||
EQUITY | |||
Tax benefit generated by merger | 63,074 | 63,074 | |
Telefonica Data S.A. (TData) | Other capital reserves | |||
EQUITY | |||
Effects of the acquisition | (59,029) | R$ 59029 | |
Terra Networks | Other capital reserves | |||
EQUITY | |||
Effects of the acquisition | R$ 10 |
EQUITY - Capital reserves - Tre
EQUITY - Capital reserves - Treasury Shares (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | Jul. 05, 2017 | Jun. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
EQUITY | |||||
Gain or loss on equity instruments | R$ 0 | ||||
Acquisition of shares in the financial market (in shares) | 661 | 45 | |||
Acquisition of shares in the financial market | R$ 32 | ||||
Transfer of lawsuits concerning judicial proceedings | R$ 2 | R$ 17 | |||
Unit issue price | R$ 45.26 | R$ 47.31 | |||
Preferred shares | |||||
EQUITY | |||||
Acquisition of shares in the financial market (in shares) | 661 | 45 | |||
Transfer of lawsuits concerning judicial proceedings (in shares) | (62) | (62) | |||
Acquisition of shares in the financial market | R$ 32 | R$ 2 | |||
Unit issue price | R$ 45.26 | R$ 47.31 | |||
Treasury shares | |||||
EQUITY | |||||
Balance (in shares) | 2,291,147 | 2,290,503 | |||
Acquisition of shares in the financial market (in shares) | (706) | ||||
Transfer of lawsuits concerning judicial proceedings (in shares) | (62) | ||||
Balance (in shares) | 2,291,147 | 2,291,147 | 2,290,503 | ||
Balance | R$ 87820 | R$ 87790 | |||
Acquisition of shares in the financial market | (32) | ||||
Transfer of lawsuits concerning judicial proceedings | 2 | R$ 15 | |||
Balance | R$ 87820 | R$ 87820 | R$ 87790 | ||
Treasury shares | Common shares | |||||
EQUITY | |||||
Balance (in shares) | 2,290,164 | 2,290,164 | |||
Balance (in shares) | 2,290,164 | 2,290,164 | 2,290,164 | ||
Treasury shares | Preferred shares | |||||
EQUITY | |||||
Balance (in shares) | 983 | 339 | |||
Acquisition of shares in the financial market (in shares) | (706) | ||||
Transfer of lawsuits concerning judicial proceedings (in shares) | (62) | ||||
Balance (in shares) | 983 | 983 | 339 |
EQUITY - Legal Reserve and Inco
EQUITY - Legal Reserve and Income reserves (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
EQUITY | |||
Revenue reserve (as a percent) | 5.00% | ||
Maximum percentage of revenue reserved in paid-in capital | 20.00% | ||
Balance | R$ 2463228 | ||
Balance | 4,324,170 | R$ 2463228 | |
Income reserves | |||
EQUITY | |||
Balance | 2,463,228 | 2,474,974 | |
Reversal of reserves | (297,000) | (550,000) | |
Recording of reserves | 2,157,942 | 538,254 | |
Balance | 4,324,170 | 2,463,228 | R$ 2474974 |
Legal reserve | |||
EQUITY | |||
Balance | 2,138,344 | 1,907,905 | |
Recording of reserves | 446,413 | 230,439 | |
Balance | 2,584,757 | 2,138,344 | 1,907,905 |
Expansion and modernization reserve | |||
EQUITY | |||
Balance | 297,000 | 550,000 | |
Reversal of reserves | (297,000) | (550,000) | (700,000) |
Recording of reserves | 1,700,000 | 297,000 | |
Balance | 1,700,000 | 297,000 | 550,000 |
Tax incentive reserve | |||
EQUITY | |||
Balance | 27,884 | 17,069 | |
Recording of reserves | 11,529 | 10,815 | |
Balance | R$ 39413 | R$ 27884 | R$ 17069 |
EQUITY - Interim dividend and i
EQUITY - Interim dividend and interest on equity (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | Apr. 12, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
EQUITY | ||||
Allocation of income to additional dividend proposed | R$ 2191864 | |||
Net income for the year | R$ 8928258 | R$ 4608790 | R$ 4085242 | |
Allocation to legal reserve | (446,413) | (230,439) | ||
Tax incentives - not distributable | (11,529) | (10,815) | ||
Adjusted net income | 8,470,316 | 4,367,536 | ||
Dividend and IOE distributed for the year: | (4,550,000) | (2,416,639) | R$ 2172145 | |
Interest on equity (gross) | (4,550,000) | (2,416,639) | ||
Balance of unallocated net income | 3,920,316 | 1,950,897 | ||
Reversal special reserve for modernization and expansion | 297,000 | 550,000 | ||
Effects of the initial adoption of IFRS 9 and 15, net of taxes in 01.01.18 | (138,663) | |||
Unclaimed dividends and interest on equity | 152,770 | 101,778 | ||
Actuarial gains (losses) recognized and effect of limitation of surplus plan assets, net of taxes and other changes | (62,739) | (113,811) | ||
Income available to be distributed | 4,168,684 | 2,488,864 | ||
Proposal for Distributions: Special reserve for modernization and expansion | 1,700,000 | 297,000 | ||
Proposal for Distributions: Additional proposed dividends | 2,468,684 | 2,191,864 | ||
Proposed additional dividends - Net income for the year | 2,171,684 | 1,641,864 | ||
Proposed additional dividends - Based on prior year's net income, referring to the reversal of the special reserve for expansion and modernization | R$ 297000 | R$ 550000 | ||
Mandatory minimum dividend - as percentage of adjusted net income | 25.00% | 25.00% | ||
Mandatory minimum dividend - 25% of adjusted net income | R$ 2117579 | R$ 1091884 | ||
Common shares | ||||
EQUITY | ||||
Dividend and IOE distributed for the year: | R$ 1438699 | R$ 764136 | ||
Total proposed for deliberation - per share | R$ 1.371013 | R$ 1.217277 | ||
Preferred shares | ||||
EQUITY | ||||
Dividend and IOE distributed for the year: | R$ 3111301 | R$ 1652503 | ||
Total proposed for deliberation - per share | R$ 1.508114 | R$ 1.339005 | ||
Percentage of increase in amount allocated to common share | 10.00% | 10.00% |
EQUITY - Allocation of interim
EQUITY - Allocation of interim dividend and interest on equity (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
EQUITY | |||
Total, Gross | R$ 4550000 | R$ 2416639 | R$ 2172145 |
IOE, net | 3,867,500 | 2,054,143 | |
Reversal of unclaimed dividends and interest on equity | 152,770 | 101,778 | |
6/18/2018 | |||
EQUITY | |||
Total, Gross | 400,000 | ||
IOE, net | 340,000 | ||
9/5/2018 | |||
EQUITY | |||
Total, Gross | 2,800,000 | ||
IOE, net | 2,380,000 | ||
12/4/2018 | |||
EQUITY | |||
Total, Gross | 1,350,000 | ||
IOE, net | 1,147,500 | ||
2/13/2017 | |||
EQUITY | |||
Total, Gross | 180,000 | ||
IOE, net | 153,000 | ||
3/20/2017 | |||
EQUITY | |||
Total, Gross | 350,000 | ||
IOE, net | 297,500 | ||
6/19/2017 | |||
EQUITY | |||
Total, Gross | 95,000 | ||
IOE, net | 80,750 | ||
9/18/2017 | |||
EQUITY | |||
Total, Gross | 305,000 | ||
IOE, net | 259,250 | ||
12/14/2017 | |||
EQUITY | |||
Total, Gross | 1,486,639 | ||
IOE, net | 1,263,643 | ||
Common shares | |||
EQUITY | |||
Total, Gross | 1,438,699 | 764,136 | |
IOE, net | 1,222,894 | 649,516 | |
Common shares | 6/18/2018 | |||
EQUITY | |||
Total, Gross | 126,479 | ||
IOE, net | R$ 107507 | ||
IOE, per share | R$ 0.188823 | ||
Common shares | 9/5/2018 | |||
EQUITY | |||
Total, Gross | R$ 885353 | ||
IOE, net | R$ 752550 | ||
IOE, per share | R$ 1.321761 | ||
Common shares | 12/4/2018 | |||
EQUITY | |||
Total, Gross | R$ 426867 | ||
IOE, net | R$ 362837 | ||
IOE, per share | R$ 0.637278 | ||
Common shares | 2/13/2017 | |||
EQUITY | |||
Total, Gross | 56,916 | ||
IOE, net | R$ 48379 | ||
IOE, per share | R$ 0.084970 | ||
Common shares | 3/20/2017 | |||
EQUITY | |||
Total, Gross | R$ 110669 | ||
IOE, net | R$ 94069 | ||
IOE, per share | R$ 0.165220 | ||
Common shares | 6/19/2017 | |||
EQUITY | |||
Total, Gross | R$ 30039 | ||
IOE, net | R$ 25533 | ||
IOE, per share | R$ 0.044845 | ||
Common shares | 9/18/2017 | |||
EQUITY | |||
Total, Gross | R$ 96440 | ||
IOE, net | R$ 81974 | ||
IOE, per share | R$ 0.143978 | ||
Common shares | 12/14/2017 | |||
EQUITY | |||
Total, Gross | R$ 470072 | ||
IOE, net | R$ 399561 | ||
IOE, per share | R$ 0.701779 | ||
Preferred shares | |||
EQUITY | |||
Total, Gross | R$ 3111301 | R$ 1652503 | |
IOE, net | R$ 2644606 | R$ 1404627 | |
Percentage of increase in amount allocated to common share | 10.00% | 10.00% | |
Preferred shares | 6/18/2018 | |||
EQUITY | |||
Total, Gross | R$ 273521 | ||
IOE, net | R$ 232493 | ||
IOE, per share | R$ 0.207705 | ||
Preferred shares | 9/5/2018 | |||
EQUITY | |||
Total, Gross | R$ 1914647 | ||
IOE, net | R$ 1627450 | ||
IOE, per share | R$ 1.453937 | ||
Preferred shares | 12/4/2018 | |||
EQUITY | |||
Total, Gross | R$ 923133 | ||
IOE, net | R$ 784663 | ||
IOE, per share | R$ 0.701006 | ||
Preferred shares | 2/13/2017 | |||
EQUITY | |||
Total, Gross | R$ 123084 | ||
IOE, net | R$ 104621 | ||
IOE, per share | R$ 0.093467 | ||
Preferred shares | 3/20/2017 | |||
EQUITY | |||
Total, Gross | R$ 239331 | ||
IOE, net | R$ 203431 | ||
IOE, per share | R$ 0.181742 | ||
Preferred shares | 6/19/2017 | |||
EQUITY | |||
Total, Gross | R$ 64961 | ||
IOE, net | R$ 55217 | ||
IOE, per share | R$ 0.049330 | ||
Preferred shares | 9/18/2017 | |||
EQUITY | |||
Total, Gross | R$ 208560 | ||
IOE, net | R$ 177276 | ||
IOE, per share | R$ 0.158375 | ||
Preferred shares | 12/14/2017 | |||
EQUITY | |||
Total, Gross | R$ 1016567 | ||
IOE, net | R$ 864082 | ||
IOE, per share | R$ 0.771957 |
EQUITY - Changes in other compr
EQUITY - Changes in other comprehensive income (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in other comprehensive income | ||
Balance | R$ 21328 | R$ 11461 |
Translation gains | 9,927 | 11,239 |
Losses from future contracts | (1,618) | (1,595) |
Gains (Losses) on financial assets at fair value through other comprehensive income | (412) | 223 |
Balance | 29,225 | 21,328 |
Financial assets at fair value through other comprehensive income | ||
Changes in other comprehensive income | ||
Balance | (8,658) | (8,881) |
Gains (Losses) on financial assets at fair value through other comprehensive income | (412) | 223 |
Balance | (9,070) | (8,658) |
Derivative transactions | ||
Changes in other comprehensive income | ||
Balance | 1,954 | 3,549 |
Losses from future contracts | (1,618) | (1,595) |
Balance | 336 | 1,954 |
Currency translation effects - foreign investments | ||
Changes in other comprehensive income | ||
Balance | 28,032 | 16,793 |
Translation gains | 9,927 | 11,239 |
Balance | R$ 37959 | R$ 28032 |
EQUITY - Company Share Repurcha
EQUITY - Company Share Repurchase Program (Details) - BRL (R$) R$ / shares in Units, R$ in Thousands | Jul. 05, 2017 | Jun. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
EQUITY | ||||
Acquisition of shares in the financial market (in shares) | 661 | 45 | ||
Unit issue price | R$ 45.26 | R$ 47.31 | ||
Acquisition of shares in the financial market | R$ 32 | |||
Common shares | ||||
EQUITY | ||||
Shares to be acquired under repurchase program | 583,422 | 870,781 | ||
Preferred shares | ||||
EQUITY | ||||
Shares to be acquired under repurchase program | 37,736,465 | 41,510,761 | ||
Acquisition of shares in the financial market (in shares) | 661 | 45 | ||
Unit issue price | R$ 45.26 | R$ 47.31 | ||
Acquisition of shares in the financial market | R$ 32 | R$ 2 | ||
Treasury shares | ||||
EQUITY | ||||
Acquisition of shares in the financial market (in shares) | (706) | |||
Acquisition of shares in the financial market | R$ 32 | |||
Treasury shares | Preferred shares | ||||
EQUITY | ||||
Acquisition of shares in the financial market (in shares) | (706) |
EQUITY - Earnings per share (De
EQUITY - Earnings per share (Details) - BRL (R$) R$ / shares in Units, shares in Thousands, R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
EQUITY | |||
Net income for the year | R$ 8928258 | R$ 4608790 | R$ 4085242 |
Weighted average number of outstanding shares for the year | 1,688,694 | 1,688,694 | 1,688,694 |
Common shares | |||
EQUITY | |||
Net income for the year | R$ 2823093 | R$ 1457288 | R$ 1291743 |
Weighted average number of outstanding shares for the year | 569,354 | 569,354 | 569,354 |
Basic and diluted earnings per share | R$ 4.96 | R$ 2.56 | R$ 2.27 |
Preferred shares | |||
EQUITY | |||
Net income for the year | R$ 6105165 | R$ 3151502 | R$ 2793499 |
Weighted average number of outstanding shares for the year | 1,119,340 | 1,119,340 | 1,119,340 |
Basic and diluted earnings per share | R$ 5.45 | R$ 2.82 | R$ 2.50 |
NET OPERATING REVENUE (Details)
NET OPERATING REVENUE (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue breakdown | |||
Gross operating revenue | R$ 65794397 | R$ 66243174 | R$ 65006728 |
Deductions from gross operating revenue | (22,331,657) | (23,036,342) | (22,498,269) |
Taxes | (14,559,915) | (16,058,584) | (15,388,784) |
Discounts granted and return of goods | (7,771,742) | (6,977,758) | (7,109,485) |
Net operating revenue | 43,462,740 | 43,206,832 | 42,508,459 |
Services | |||
Revenue breakdown | |||
Gross operating revenue | 61,292,362 | 62,696,433 | 61,513,099 |
Taxes | (13,820,784) | (15,468,315) | (14,780,018) |
Discounts granted and return of goods | (6,288,941) | (5,340,476) | (5,612,695) |
Net operating revenue | 41,182,637 | 41,887,642 | 41,120,386 |
Sale of goods | |||
Revenue breakdown | |||
Gross operating revenue | 4,502,035 | 3,546,741 | 3,493,629 |
Taxes | (739,131) | (590,269) | (608,766) |
Discounts granted and return of goods | (1,482,801) | (1,637,282) | (1,496,790) |
Net operating revenue | R$ 2280103 | R$ 1319190 | R$ 1388073 |
OPERATING COSTS AND EXPENSES (D
OPERATING COSTS AND EXPENSES (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
OPERATING COSTS AND EXPENSES | |||
Personnel | R$ 3996140 | R$ 3725767 | R$ 3859788 |
Third-party services | (14,883,457) | (15,703,568) | (16,100,327) |
Rental, insurance, condominium and connection means | (3,307,983) | (2,980,561) | (2,688,009) |
Taxes, charges and contributions | (1,661,661) | (1,866,593) | (1,959,564) |
Estimated impairment losses on accounts receivable | (1,533,660) | (1,481,015) | (1,348,221) |
Depreciation and amortization | (8,368,623) | (7,853,734) | (7,654,406) |
Cost of goods sold | (2,406,099) | (1,955,890) | (2,118,940) |
Material and other operating costs and expenses | (299,855) | (284,981) | (342,511) |
Total | (36,457,478) | (35,852,109) | (36,071,766) |
Non-cumulative PIS and COFINS | 1,267 | 46,647 | |
Cost of sales and services | |||
OPERATING COSTS AND EXPENSES | |||
Personnel | (872,032) | (845,358) | (976,233) |
Third-party services | (6,656,924) | (7,032,252) | (7,629,246) |
Rental, insurance, condominium and connection means | (2,957,489) | (2,624,405) | (2,326,219) |
Taxes, charges and contributions | (1,594,836) | (1,792,764) | (1,861,237) |
Depreciation and amortization | (6,487,909) | (5,963,153) | (5,821,620) |
Cost of goods sold | (2,406,099) | (1,955,890) | (2,118,940) |
Material and other operating costs and expenses | (50,478) | (58,708) | (89,519) |
Total | (21,025,767) | (20,272,530) | (20,823,014) |
Selling expenses | |||
OPERATING COSTS AND EXPENSES | |||
Personnel | (2,574,498) | (2,387,314) | (2,136,399) |
Third-party services | (6,989,006) | (7,438,937) | (7,216,894) |
Rental, insurance, condominium and connection means | (147,613) | (151,455) | (141,135) |
Taxes, charges and contributions | (30,703) | (39,050) | (5,933) |
Estimated impairment losses on accounts receivable | (1,533,660) | (1,481,015) | (1,348,221) |
Depreciation and amortization | (1,352,638) | (1,433,297) | (1,408,866) |
Material and other operating costs and expenses | (204,623) | (205,406) | (197,918) |
Total | (12,832,741) | (13,136,474) | (12,455,366) |
General and administrative expenses | |||
OPERATING COSTS AND EXPENSES | |||
Personnel | (549,610) | (493,095) | (747,156) |
Third-party services | (1,237,527) | (1,232,379) | (1,254,187) |
Rental, insurance, condominium and connection means | (202,881) | (204,701) | (220,655) |
Taxes, charges and contributions | (36,122) | (34,779) | (92,394) |
Depreciation and amortization | (528,076) | (457,284) | (423,920) |
Material and other operating costs and expenses | (44,754) | (20,867) | (55,074) |
Total | R$ 2598970 | R$ 2443105 | R$ 2793386 |
OTHER OPERATING INCOME (EXPEN_3
OTHER OPERATING INCOME (EXPENSES) - Summary of other operating income (expenses) (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
OTHER OPERATING INCOME (EXPENSES), NET | |||
Recovered expenses and fines | R$ 3962150 | R$ 355415 | R$ 504877 |
Provisions for labor, tax and civil contingencies | (1,258,966) | (999,419) | (985,176) |
Net gain (loss) on asset disposal/loss | 114,853 | 108,767 | 463,602 |
Other operating income (expenses) | (367,115) | (187,249) | (51,977) |
Total | 2,450,922 | (722,486) | (68,674) |
Other operating income | 4,077,003 | 464,182 | 968,479 |
Other operating expenses | R$ 1626081 | R$ 1186668 | R$ 1037153 |
OTHER OPERATING INCOME (EXPEN_4
OTHER OPERATING INCOME (EXPENSES) - Sale of assets (Details) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018BRL (R$) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$)item | |
Sale of assets | |||
Tax credits arising from final court proceeding in favor of the Company and its subsidiary | R$ 3386433 | ||
Write-off of judicial deposits included in provision for labor, tax and civil contingencies | 160,715 | ||
Net gain (loss) on asset disposal/loss | R$ 114853 | R$ 108767 | R$ 463602 |
Transmission towers | |||
Sale of assets | |||
Net gain (loss) on asset disposal/loss | R$ 476371 | ||
Number of towers sold | item | 1,655 |
FINANCIAL INCOME (EXPENSES) (De
FINANCIAL INCOME (EXPENSES) (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
FINANCIAL INCOME (EXPENSES) | |||
Interest income | R$ 246083 | R$ 655474 | R$ 719399 |
Interest receivable (customers, taxes and other) | 118,476 | 124,391 | 104,837 |
Gain on derivative financial instruments | 305,996 | 373,971 | 994,801 |
Foreign exchange variations on loans and financing | 32,326 | 113,203 | 487,747 |
Other revenues from foreign exchange and monetary variation | 3,341,211 | 406,013 | 374,169 |
Other financial income | 68,548 | 82,906 | 100,406 |
Total | 4,112,640 | 1,755,958 | 2,781,359 |
Loan, financing, debenture and finance lease charges | (510,398) | (932,727) | (1,061,098) |
Foreign exchange variation on loans and financing | (61,174) | (129,049) | (214,952) |
Loss on derivative financial instruments | (295,208) | (415,956) | (1,342,671) |
Interest payable (financial institutions, provisions, trade accounts payable, taxes and other) | (186,238) | (136,425) | (278,175) |
Other expenses with foreign exchange and monetary variation | (963,463) | (876,948) | (830,466) |
IOF, PIS, Cofins and other financial expenses | (269,006) | (167,897) | (288,538) |
Total | (2,285,487) | (2,659,002) | (4,015,900) |
Financial income (expenses), net | 1,827,153 | R$ 903044 | R$ 1234541 |
Tax credit value included in other revenues from foreign exchange and monetary variation | R$ 2926247 |
BALANCES AND TRANSACTIONS WIT_3
BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Balance Sheet (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Cash and cash equivalents | R$ 46755 | R$ 9523 |
Accounts receivable, net | 148,814 | 201,021 |
Other assets | 120,776 | 166,733 |
Other current assets | 114,715 | 164,249 |
Other noncurrent assets | 6,061 | 2,484 |
Trade accounts payable and other payables | 383,512 | 350,844 |
Other liabilities | 31,716 | 125,987 |
Other liabilities, current | 22,220 | 124,749 |
Other liabilities, non-current | 9,496 | 1,238 |
Parent | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 9,300 | 1,023 |
Other assets | 100,227 | 135,690 |
Trade accounts payable and other payables | 687 | 7,947 |
Other liabilities | 23,294 | 114,950 |
SP Telecomunicacoes Participacoes | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 531 | |
Other assets | 10,083 | 46 |
Trade accounts payable and other payables | 6,656 | |
Other liabilities | 21,901 | 15,000 |
Telefonica LatinoAmerica Holding | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Other assets | 60,387 | 135,486 |
Trade accounts payable and other payables | 86 | |
Telefonica | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 9,300 | 492 |
Other assets | 29,757 | 158 |
Trade accounts payable and other payables | 687 | 1,205 |
Other liabilities | 1,393 | 99,950 |
Other Group companies | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Cash and cash equivalents | 46,755 | 9,523 |
Accounts receivable, net | 139,514 | 199,998 |
Other assets | 20,549 | 31,043 |
Trade accounts payable and other payables | 382,825 | 342,897 |
Other liabilities | 8,422 | 11,037 |
Colombia Telecomunicaciones ESP | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 1,334 | 1,210 |
Other assets | 520 | 4,505 |
Media Networks Brasil Solucoes Digitals | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 903 | 1,017 |
Other assets | 4,051 | 2,106 |
Trade accounts payable and other payables | 44,693 | 33,751 |
Other liabilities | 318 | 318 |
T.O2 Germany GMBH CO. OHG | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 20,877 | 22,315 |
Trade accounts payable and other payables | 5,706 | 5,477 |
Telefonica Venezolana | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 5,926 | 6,067 |
Other assets | 2,196 | |
Trade accounts payable and other payables | 5,410 | 5,240 |
Telefonica Digital Espana | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 197 | 1,929 |
Other assets | 294 | |
Trade accounts payable and other payables | 43,340 | 46,645 |
Telefonica Factoring do Brasil | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 6,360 | 12,337 |
Other assets | 133 | 93 |
Other liabilities | 2,770 | 146 |
Telefonica Global Technology | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Other assets | 13,600 | |
Trade accounts payable and other payables | 28,750 | 15,671 |
Telefonica Inteligencia e Seguranca Brasil | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 800 | 271 |
Other assets | 986 | 1,013 |
Trade accounts payable and other payables | 52,184 | 15,336 |
Other liabilities | 27 | 27 |
Telefonica International Wholesale Services Espanha | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 46,537 | 69,087 |
Trade accounts payable and other payables | 26,097 | 44,240 |
Other liabilities | 8 | |
Telefonica Servicos de Ensino | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 286 | 175 |
Trade accounts payable and other payables | 22,518 | 37,931 |
Telefonica Moviles Argentina | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 5,074 | 7,194 |
Trade accounts payable and other payables | 4,160 | 3,865 |
Telefonica Moviles Del Espanha | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 7,576 | 8,918 |
Trade accounts payable and other payables | 5,233 | 3,589 |
Telefonica USA | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 9,005 | 7,157 |
Trade accounts payable and other payables | 4,411 | 7,425 |
Other liabilities | 200 | 171 |
Telfisa Global BV | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Cash and cash equivalents | 46,755 | 9,523 |
Telxius Cable Brasil | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 11,628 | 28,981 |
Other assets | 5,295 | 819 |
Trade accounts payable and other payables | 39,662 | 44,037 |
Other liabilities | 2,067 | 2,068 |
Telxius Torres Brasil | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 6,776 | 14,666 |
Other assets | 4,268 | 5,106 |
Trade accounts payable and other payables | 38,735 | 37,718 |
Other liabilities | 1,926 | 7,757 |
Terra Networks Chile, Terra Networks Mexico, Terra Networks Peru e Terra Networks Argentina and Terra Networks Colombia | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 5,341 | 7,822 |
Trade accounts payable and other payables | 1,766 | 907 |
Colombia Telecomunicaciones S.A. ESP | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Trade accounts payable and other payables | 1,056 | 471 |
Fundacao Telefonica | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Other liabilities | 82 | 137 |
Media Networks Latina America SAC | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Trade accounts payable and other payables | 10,212 | 4,248 |
Telefonica Compras Electronicas | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Trade accounts payable and other payables | 32,582 | 24,311 |
Other | ||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Accounts receivable, net | 10,894 | 10,852 |
Other assets | 2,806 | 3,801 |
Trade accounts payable and other payables | 16,310 | 12,035 |
Other liabilities | R$ 1032 | R$ 405 |
BALANCES AND TRANSACTIONS WIT_4
BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Income Statement (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | R$ 126038 | R$ 90398 | R$ 116843 |
Cost and other expenses (revenues) operating | (1,289,791) | (1,058,207) | (946,039) |
Financial result | (10,559) | 3,784 | (17,570) |
Parent | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (356,877) | (294,893) | (232,115) |
Financial result | (7,603) | 10,034 | (5,379) |
SP Telecomunicacoes Participacoes | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | 347 | 268 | 67 |
Telefonica LatinoAmerica Holding | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | 16,466 | 36,523 | 87,526 |
Financial result | 9,077 | 11,030 | 4,348 |
Telefonica | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (373,690) | (331,684) | (319,708) |
Financial result | (16,680) | (996) | (9,727) |
Other Group companies | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 126,038 | 90,398 | 116,843 |
Cost and other expenses (revenues) operating | (932,914) | (763,314) | (713,924) |
Financial result | (2,956) | (6,250) | (12,191) |
Colombia Telecomunicaciones S.A. ESP | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 250 | 349 | 217 |
Cost and other expenses (revenues) operating | (4,280) | (10) | (2,845) |
Financial result | (2,145) | 604 | (926) |
Companhia AIX de Participacoes | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 75 | 36 | 67 |
Cost and other expenses (revenues) operating | (22,645) | (22,738) | (21,316) |
Fundacao Telefonica | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (12,223) | (11,395) | (10,530) |
Media Networks Brasil Solucoes Digitals | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 2,006 | 601 | 572 |
Cost and other expenses (revenues) operating | (101,272) | (57,177) | (3,451) |
Media Networks Latina America SAC | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (34,791) | (33,133) | (17,133) |
Financial result | (1,007) | (516) | (50) |
Telefonica Servicos de Ensino | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 1,158 | 292 | 2 |
Cost and other expenses (revenues) operating | (49,130) | (54,781) | (47,544) |
Financial result | 1,311 | ||
T.O2 Germany GMBH CO. OHG | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 148 | 75 | 45 |
Cost and other expenses (revenues) operating | (1,975) | (1,409) | (4,527) |
Telefonica Compras Electronicas | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (34,534) | (29,062) | (42,889) |
Telefonica Digital Espana | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (124,537) | (81,893) | (44,872) |
Financial result | (813) | (2,600) | (1,262) |
Telefonica Factoring do Brasil | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 2,416 | 69 | 41 |
Cost and other expenses (revenues) operating | 212 | 828 | 200 |
Financial result | 2,601 | 61 | |
Telefonica Global Technology | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (36,738) | (36,395) | (28,933) |
Financial result | (4,134) | 40 | (756) |
Telefonica Inteligencia e Seguranca Brasil | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 1,568 | 706 | 1,041 |
Cost and other expenses (revenues) operating | (54,210) | (40,918) | (39,709) |
Financial result | 389 | ||
Telefonica International Wholesale Services Espanha | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 53,357 | 56,728 | 72,520 |
Cost and other expenses (revenues) operating | (64,036) | (49,960) | (56,293) |
Financial result | 9,771 | (2,564) | (15,008) |
Telefonica Moviles Argentina | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 5,916 | 3,746 | 3,072 |
Cost and other expenses (revenues) operating | (3,437) | 6,147 | (9,112) |
Telefonica Moviles Del Chile | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 1,293 | 1,586 | 1,074 |
Cost and other expenses (revenues) operating | (3,159) | (2,196) | (1,096) |
Financial result | 39 | 52 | (80) |
Telefonica Moviles Del Espanha | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | (209) | 1,048 | (836) |
Cost and other expenses (revenues) operating | (4,166) | (1,969) | (2,170) |
Telefonica USA | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 1,518 | 2,392 | 2,998 |
Cost and other expenses (revenues) operating | (19,441) | (13,202) | (14,970) |
Financial result | (539) | (2,185) | (349) |
Telxius Cable Brasil | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 49,777 | 15,045 | 17,624 |
Cost and other expenses (revenues) operating | (206,095) | (200,537) | (246,595) |
Financial result | (7,896) | 787 | 244 |
Telxius Torres Brasil | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 3,218 | 31 | |
Cost and other expenses (revenues) operating | (129,706) | (107,373) | (72,460) |
Financial result | 1,929 | ||
Terra Networks Chile, Terra Networks Mexico, Terra Networks Peru e Terra Networks Argentina and Terra Networks Colombia | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Cost and other expenses (revenues) operating | (2,794) | 1,072 | |
Financial result | 1,450 | (59) | |
Other | |||
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | |||
Operating revenues | 3,547 | 7,725 | 18,375 |
Cost and other expenses (revenues) operating | (23,957) | (27,213) | (47,679) |
Financial result | R$ 283 | R$ 130 | R$ 2367 |
BALANCES AND TRANSACTIONS WIT_5
BALANCES AND TRANSACTIONS WITH RELATED PARTIES - Management compensation (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
BALANCES AND TRANSACTIONS WITH RELATED PARTIES | ||
Key management personnel compensation | R$ 26431 | R$ 21684 |
Salaries, benefits and social charges | 17,493 | 14,439 |
Variable compensation | R$ 8938 | R$ 7245 |
SHARE-BASED PAYMENT PLANS (Deta
SHARE-BASED PAYMENT PLANS (Details) R$ in Thousands | Jun. 08, 2018 | Dec. 31, 2018BRL (R$)itemshares | Dec. 31, 2017BRL (R$) | Dec. 31, 2014 | Dec. 31, 2018€ / shares |
SHARE-BASED PAYMENT PLANS | |||||
Share price | € / shares | € 7.3309 | ||||
Expense from share-based payment transactions with employees | R$ | R$ 10433 | R$ 7013 | |||
Talent future share plan | |||||
SHARE-BASED PAYMENT PLANS | |||||
Initial life of the plan | 3 years | 3 years | |||
TFSP 2018-2020 cycle | |||||
SHARE-BASED PAYMENT PLANS | |||||
Number of potential shares to be received | shares | 122,250 | ||||
Perform Share Plan | |||||
SHARE-BASED PAYMENT PLANS | |||||
Initial life of the plan | 3 years | ||||
PSP 2018-2020 cycle | |||||
SHARE-BASED PAYMENT PLANS | |||||
Number of active executives | item | 113 | ||||
Number of executives appointed under articles Bylaws | item | 3 | ||||
Number of potential shares to be received | shares | 977,737 |
PENSION PLANS AND OTHER POST-_3
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sponsored Plans by Type (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
VISAO Plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Contributions made by the Company and its subsidiaries | R$ 39967 | R$ 43702 |
PENSION PLANS AND OTHER POST-_4
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Reconciliation of net liabilities (assets) (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Reconciliation of assets and liabilities: | |||
Present value of DB plan obligations | R$ 3324512 | R$ 2912227 | |
Fair value of plan assets | 3,762,994 | 3,311,739 | |
Net liabilities (assets) | (438,482) | (399,512) | |
Net liabilities (assets) | 668,481 | 522,105 | R$ 318629 |
Noncurrent assets | (10,997) | (9,833) | |
Current liabilities | 19,667 | 16,935 | |
Noncurrent liabilities | 659,811 | 515,003 | |
Post-retirement pension plans | |||
Reconciliation of assets and liabilities: | |||
Present value of DB plan obligations | 2,011,355 | 1,861,651 | |
Fair value of plan assets | 2,999,669 | 2,585,679 | |
Net liabilities (assets) | (988,314) | (724,028) | |
Net liabilities (assets) | 68,368 | 67,148 | 54,026 |
Noncurrent assets | (10,997) | (9,833) | |
Current liabilities | 8,114 | 7,914 | |
Noncurrent liabilities | 71,251 | 69,068 | |
Post-retirement health plans | |||
Reconciliation of assets and liabilities: | |||
Present value of DB plan obligations | 1,313,157 | 1,050,576 | |
Fair value of plan assets | 763,325 | 726,060 | |
Net liabilities (assets) | 549,832 | 324,516 | |
Net liabilities (assets) | 600,113 | 454,957 | 264,603 |
Current liabilities | 11,553 | 9,021 | |
Noncurrent liabilities | 588,560 | 445,935 | |
Asset Limitation | |||
Reconciliation of assets and liabilities: | |||
Net liabilities (assets) | 1,106,963 | 921,617 | 1,158,707 |
Asset Limitation | Post-retirement pension plans | |||
Reconciliation of assets and liabilities: | |||
Net liabilities (assets) | 1,056,682 | 791,177 | 993,754 |
Asset Limitation | Post-retirement health plans | |||
Reconciliation of assets and liabilities: | |||
Net liabilities (assets) | R$ 50281 | R$ 130440 | R$ 164953 |
PENSION PLANS AND OTHER POST-_5
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Total expenses recognized in the income statement (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Current service cost | R$ 16653 | R$ 10650 | R$ 5572 |
Net interest on net actuarial assets/liabilities | 51,966 | 34,583 | 8,264 |
Total | 68,619 | 45,233 | 13,836 |
Post-retirement pension plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Current service cost | 2,931 | 3,044 | 2,811 |
Net interest on net actuarial assets/liabilities | 6,074 | 5,258 | 5,278 |
Total | 9,005 | 8,302 | 8,089 |
Post-retirement health plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Current service cost | 13,722 | 7,606 | 2,761 |
Net interest on net actuarial assets/liabilities | 45,892 | 29,325 | 2,986 |
Total | R$ 59614 | R$ 36931 | R$ 5747 |
PENSION PLANS AND OTHER POST-_6
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Amounts recognized in other comprehensive income (loss) (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Actuarial (losses) gains | R$ 1643 | R$ 533487 | R$ 65576 |
Asset limitation effect | 95,134 | (362,191) | 171,191 |
Total | 93,491 | 171,296 | 236,767 |
Post-retirement pension plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Actuarial (losses) gains | (186,170) | 325,292 | (174,496) |
Asset limitation effect | 188,259 | (309,780) | 182,088 |
Total | 2,089 | 15,512 | 7,592 |
Post-retirement health plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Actuarial (losses) gains | 184,527 | 208,195 | 240,072 |
Asset limitation effect | (93,125) | (52,411) | (10,897) |
Total | R$ 91402 | R$ 155784 | R$ 229175 |
PENSION PLANS AND OTHER POST-_7
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in amount net of liability (asset) of defined benefit, net (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | R$ 522105 | R$ 318629 |
Business combinations | 668 | |
Expenses | 68,619 | 45,233 |
Sponsor contributions | (15,734) | (13,721) |
Amounts recognized in OCI | 93,491 | 171,296 |
Balance at the end of the year | 668,481 | 522,105 |
Actuarial assets per balance sheet | (10,997) | (9,833) |
Actuarial liabilities per balance sheet | 679,478 | 531,938 |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 67,148 | 54,026 |
Business combinations | (12) | |
Expenses | 9,005 | 8,302 |
Sponsor contributions | (9,874) | (10,680) |
Amounts recognized in OCI | 2,089 | 15,512 |
Balance at the end of the year | 68,368 | 67,148 |
Actuarial assets per balance sheet | (10,997) | (9,833) |
Actuarial liabilities per balance sheet | 79,365 | 76,982 |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 454,957 | 264,603 |
Business combinations | 680 | |
Expenses | 59,614 | 36,931 |
Sponsor contributions | (5,860) | (3,041) |
Amounts recognized in OCI | 91,402 | 155,784 |
Balance at the end of the year | 600,113 | 454,957 |
Actuarial liabilities per balance sheet | R$ 600113 | R$ 454956 |
PENSION PLANS AND OTHER POST-_8
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in defined benefit liability (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | R$ 522105 | R$ 318629 |
Liability assumed after acquisition of company | 668 | |
Balance at the end of the year | 668,481 | 522,105 |
Defined benefit liability | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 2,912,227 | 2,531,508 |
Liability assumed after acquisition of company | 929 | |
Current service costs | 16,653 | 10,650 |
Interest on actuarial liabilities | 277,459 | 263,696 |
Benefits paid | (174,754) | (199,633) |
Member contributions paid | 451 | 220 |
Actuarial losses (gains) adjusted by experience | 144,404 | 104,856 |
Actuarial losses (gains) adjusted by demographic assumptions | 46,122 | (4,863) |
Actuarial losses (gains) adjusted by financial assumptions | 101,950 | 204,864 |
Balance at the end of the year | 3,324,512 | 2,912,227 |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 67,148 | 54,026 |
Liability assumed after acquisition of company | (12) | |
Balance at the end of the year | 68,368 | 67,148 |
Post-retirement pension plans | Defined benefit liability | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 1,861,651 | 1,763,866 |
Liability assumed after acquisition of company | 249 | |
Current service costs | 2,931 | 3,044 |
Interest on actuarial liabilities | 173,842 | 181,208 |
Benefits paid | (136,916) | (168,856) |
Member contributions paid | 451 | 220 |
Actuarial losses (gains) adjusted by experience | 80,126 | (23,613) |
Actuarial losses (gains) adjusted by demographic assumptions | (3,320) | |
Actuarial losses (gains) adjusted by financial assumptions | 29,270 | 108,853 |
Balance at the end of the year | 2,011,355 | 1,861,651 |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 454,957 | 264,603 |
Liability assumed after acquisition of company | 680 | |
Balance at the end of the year | 600,113 | 454,957 |
Post-retirement health plans | Defined benefit liability | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 1,050,576 | 767,642 |
Liability assumed after acquisition of company | 680 | |
Current service costs | 13,722 | 7,606 |
Interest on actuarial liabilities | 103,617 | 82,488 |
Benefits paid | (37,838) | (30,777) |
Actuarial losses (gains) adjusted by experience | 64,278 | 128,469 |
Actuarial losses (gains) adjusted by demographic assumptions | 46,122 | (1,543) |
Actuarial losses (gains) adjusted by financial assumptions | 72,680 | 96,011 |
Balance at the end of the year | R$ 1313157 | R$ 1050576 |
PENSION PLANS AND OTHER POST-_9
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in the fair value of plan assets (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | R$ 522105 | R$ 318629 |
Asset acquired on acquisition of company | (668) | |
Balance at the end of the year | (668,481) | (522,105) |
Fair value of plan assets | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 3,311,739 | 3,371,586 |
Asset acquired on acquisition of company | 323 | |
Benefits paid | (161,002) | (188,137) |
Participants contributions paid | 451 | 220 |
Sponsor contributions paid | 1,982 | 2,226 |
Interest income on plan assets | 315,704 | 354,151 |
Return on plan assets excluding interest income | 294,120 | (228,630) |
Balance at the end of the year | 3,762,994 | 3,311,739 |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | (67,148) | (54,026) |
Asset acquired on acquisition of company | 12 | |
Balance at the end of the year | (68,368) | (67,148) |
Post-retirement pension plans | Fair value of plan assets | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 2,585,679 | 2,703,593 |
Asset acquired on acquisition of company | 323 | |
Benefits paid | (128,991) | (160,370) |
Participants contributions paid | 451 | 220 |
Sponsor contributions paid | 1,949 | 2,195 |
Interest income on plan assets | 245,014 | 283,090 |
Return on plan assets excluding interest income | 295,567 | (243,372) |
Balance at the end of the year | 2,999,669 | 2,585,679 |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | (454,957) | (264,603) |
Asset acquired on acquisition of company | (680) | |
Balance at the end of the year | (600,113) | (454,957) |
Post-retirement health plans | Fair value of plan assets | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 726,060 | 667,993 |
Benefits paid | (32,011) | (27,767) |
Sponsor contributions paid | 33 | 31 |
Interest income on plan assets | 70,690 | 71,061 |
Return on plan assets excluding interest income | (1,447) | 14,742 |
Balance at the end of the year | R$ 763325 | R$ 726060 |
PENSION PLANS AND OTHER POST_10
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in assets limitation (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | R$ 522105 | R$ 318629 |
Effect generated by company acquisition | 668 | |
Balance at the end of the year | 668,481 | 522,105 |
Asset Limitation | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 921,617 | 1,158,707 |
Interest on the asset limitation | 90,212 | 125,038 |
Changes in the assets limitation, except interest | 95,134 | (362,190) |
Effect generated by company acquisition | 62 | |
Balance at the end of the year | 1,106,963 | 921,617 |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 67,148 | 54,026 |
Effect generated by company acquisition | (12) | |
Balance at the end of the year | 68,368 | 67,148 |
Post-retirement pension plans | Asset Limitation | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 791,177 | 993,754 |
Interest on the asset limitation | 77,246 | 107,140 |
Changes in the assets limitation, except interest | 188,259 | (309,779) |
Effect generated by company acquisition | 62 | |
Balance at the end of the year | 1,056,682 | 791,177 |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 454,957 | 264,603 |
Effect generated by company acquisition | 680 | |
Balance at the end of the year | 600,113 | 454,957 |
Post-retirement health plans | Asset Limitation | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Balance at the beginning of the year | 130,440 | 164,953 |
Interest on the asset limitation | 12,966 | 17,898 |
Changes in the assets limitation, except interest | (93,125) | (52,411) |
Balance at the end of the year | R$ 50281 | R$ 130440 |
PENSION PLANS AND OTHER POST_11
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Results projected (Details) R$ in Thousands | 12 Months Ended |
Dec. 31, 2018BRL (R$) | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Current service cost | R$ 19254 |
Net interest on net defined benefit liability/asset | 62,313 |
Total | 81,567 |
Post-retirement pension plans | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Current service cost | 3,076 |
Net interest on net defined benefit liability/asset | 5,762 |
Total | 8,838 |
Post-retirement health plans | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Current service cost | 16,178 |
Net interest on net defined benefit liability/asset | 56,551 |
Total | R$ 72729 |
PENSION PLANS AND OTHER POST_12
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sponsoring company contributions projected (Details) R$ in Thousands | 12 Months Ended |
Dec. 31, 2018BRL (R$) | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Sponsor contributions | R$ 10335 |
Benefits paid directly by the sponsor | 11,594 |
Total | 21,929 |
Post-retirement pension plans | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Sponsor contributions | 2,221 |
Benefits paid directly by the sponsor | 35 |
Total | 2,256 |
Post-retirement health plans | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |
Sponsor contributions | 8,114 |
Benefits paid directly by the sponsor | 11,559 |
Total | R$ 19673 |
PENSION PLANS AND OTHER POST_13
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Average weighted duration of defined benefit liability (Details) - Y | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Average weighted duration of defined benefit liability | 7.8 | 8.5 |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Average weighted duration of defined benefit liability | 16.5 | 18.7 |
PENSION PLANS AND OTHER POST_14
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Actuarial Assumptions (Details) - Y | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Long term inflation rate | 4.30% | 4.30% |
Annual increase in use of healthcare services according to age | 4.00% | 4.00% |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Nominal annual adjustment rate of pension benefits | 4.00% | 4.30% |
Visao | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Discount rate to present value of defined benefit liability | 9.00% | 9.50% |
Mortality table for nondisabled individuals (as a percent) | 50.00% | 50.00% |
Disability table ( as a percent) | 30.00% | |
Visao and Tcoprev | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Estimated retirement age | 60 | 60 |
PBS-A and CTB | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Discount rate to present value of defined benefit liability | 9.10% | 9.80% |
Telefnica BD and Tcoprev | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Discount rate to present value of defined benefit liability | 9.20% | 9.90% |
Visao, CTB, Telefonica BD and Tcoprev | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Future salary growth rate | 5.70% | 5.90% |
PBS-A, CTB and Telefonica BD | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Estimated retirement age | 57 | 57 |
Mortality table for nondisabled individuals (as a percent) | 10.00% | 10.00% |
Mortality table for disabled individuals (as a percent) | 40.00% | 40.00% |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Discount rate to present value of defined benefit liability | 9.30% | 9.90% |
Medical expense growth rate | 7.10% | 7.40% |
Medical service eligibility age | 57 years | 57 years |
Contribution eligibility on retirement (as a percent) | 100.00% | 100.00% |
Estimated retirement age | 57 | 57 |
Mortality table for nondisabled individuals (as a percent) | 10.00% | 10.00% |
Mortality table for disabled individuals (as a percent) | 40.00% | 40.00% |
PENSION PLANS AND OTHER POST_15
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Changes in Actuarial Assumptions in Relation to Prior Year (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | R$ 668481 | R$ 522105 | R$ 318629 |
Post-retirement pension plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | 68,368 | 67,148 | 54,026 |
Post-retirement health plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | 600,113 | 454,957 | 264,603 |
Defined benefit liability | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | 3,324,512 | 2,912,227 | 2,531,508 |
Difference from change in actuarial assumptions | 148,072 | ||
Defined benefit liability | Post-retirement pension plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | 2,011,355 | 1,861,651 | 1,763,866 |
Difference from change in actuarial assumptions | 29,270 | ||
Defined benefit liability | Post-retirement health plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | 1,313,157 | R$ 1050576 | R$ 767642 |
Difference from change in actuarial assumptions | 118,802 | ||
Based on prior-year actuarial assumptions | Defined benefit liability | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | (3,176,440) | ||
Based on prior-year actuarial assumptions | Defined benefit liability | Post-retirement pension plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | (1,982,085) | ||
Based on prior-year actuarial assumptions | Defined benefit liability | Post-retirement health plans | |||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | |||
Defined benefit liability | R$ 1194355 |
PENSION PLANS AND OTHER POST_16
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Sensitivity analysis for actuarial assumptions (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | R$ 3324512 | R$ 2912227 |
Discount rate | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Increase in actuarial assumption (as a percent) | 0.50% | |
Decrease in actuarial assumption (as a percent) | 0.50% | |
Defined benefit liability, discounted to present value at current rate | R$ 3324512 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 3,153,897 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | R$ 3513031 | |
Rate of growth of medical costs | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Increase in actuarial assumption (as a percent) | 1.00% | |
Decrease in actuarial assumption (as a percent) | 1.00% | |
Defined benefit liability, discounted to present value at current rate | R$ 3324512 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 3,546,996 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | 3,146,385 | |
Post-retirement pension plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 2,011,355 | 1,861,651 |
Post-retirement pension plans | Discount rate | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 2,011,355 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 1,934,817 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | 2,093,908 | |
Post-retirement pension plans | Rate of growth of medical costs | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 2,011,355 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 2,011,355 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | 2,011,355 | |
Post-retirement health plans | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 1,313,157 | R$ 1050576 |
Post-retirement health plans | Discount rate | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 1,313,157 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 1,219,080 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | 1,419,123 | |
Post-retirement health plans | Rate of growth of medical costs | ||
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS | ||
Defined benefit liability, discounted to present value at current rate | 1,313,157 | |
Defined benefit liability, discounted to present value considering a rate increased by 0.5% | 1,535,641 | |
Defined benefit liability, discounted to present value considering a rate decreased by 0.5% | R$ 1135030 |
PENSION PLANS AND OTHER POST_17
PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS - Allocation of plan assets (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Allocation of plan assets | ||
Total | R$ 3762994 | R$ 3311739 |
Post-retirement pension plans | ||
Allocation of plan assets | ||
Total | 2,999,669 | 2,585,679 |
Post-retirement pension plans | Market value quoted in active market | ||
Allocation of plan assets | ||
Real estate investments | 111,417 | 96,525 |
Structured investments | 743 | 3,753 |
Post-retirement pension plans | Market value quoted in active market | National Treasury Note (NTN) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 2,437,547 | 1,998,931 |
Post-retirement pension plans | Market value quoted in active market | Treasury Financial Letter (LFT) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 177,319 | 199,135 |
Post-retirement pension plans | Market value quoted in active market | Repurchase operations | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 196,830 | 142,228 |
Post-retirement pension plans | Market value quoted in active market | Debentures | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 13,487 | 13,209 |
Post-retirement pension plans | Market value quoted in active market | Financial bills | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 12,556 | 4,567 |
Post-retirement pension plans | Market value quoted in active market | FIDC shares / Others | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 2,356 | 3,694 |
Post-retirement pension plans | Market value quoted in active market | National Treasury Notes (LTN) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 462 | 2,165 |
Post-retirement pension plans | Market value quoted in active market | Bank Deposit Certificates (CDB) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 232 | 1,317 |
Post-retirement pension plans | Market value quoted in active market | Investments in energy sector | ||
Allocation of plan assets | ||
Variable income investments | 138 | 57,781 |
Post-retirement pension plans | Market value quoted in active market | Investments in food and beverage industry | ||
Allocation of plan assets | ||
Variable income investments | 17,921 | 32,337 |
Post-retirement pension plans | Market value quoted in active market | Investments in mining sector | ||
Allocation of plan assets | ||
Variable income investments | 287 | 1,197 |
Post-retirement pension plans | Market value quoted in active market | Investments in other sectors | ||
Allocation of plan assets | ||
Variable income investments | 5,822 | 7,124 |
Post-retirement pension plans | Market value quoted in active market | Loans to participants | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 19,312 | 18,346 |
Post-retirement pension plans | Market value not quoted in active market | ||
Allocation of plan assets | ||
Structured investments | 1,991 | 1,780 |
Post-retirement pension plans | Market value not quoted in active market | Loans to participants | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 1,249 | 1,590 |
Post-retirement health plans | ||
Allocation of plan assets | ||
Total | 763,325 | 726,060 |
Post-retirement health plans | Market value quoted in active market | National Treasury Note (NTN) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | 702,946 | 670,516 |
Post-retirement health plans | Market value quoted in active market | Treasury Financial Letter (LFT) | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | R$ 55544 | |
Post-retirement health plans | Market value quoted in active market | Financial bills | ||
Allocation of plan assets | ||
Fixed income investments and Loans to participants | R$ 60379 |
FINANCIAL INSTRUMENTS AND RIS_3
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Derivative financial instruments (Details) - instrument | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Derivative financial instruments for speculative purposes | 0 | |
Embedded derivative financial instruments held | 0 | 0 |
Threshold business days for linear convention | 360 days | |
Threshold business days for exponential convention | 252 days |
FINANCIAL INSTRUMENTS AND RIS_4
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Derivatives financial instruments classified as swaps (Details) € in Thousands, R$ in Thousands, $ in Thousands | Dec. 31, 2018USD ($) | Dec. 31, 2018EUR (€) | Dec. 31, 2018BRL (R$) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) |
Derivatives financial instruments | |||||
Current | R$ 69065 | R$ 87643 | |||
Non Current | 26,468 | 76,762 | |||
Current | (16,538) | (5,239) | |||
Non Current | (22,845) | (15,412) | |||
Total | 56,150 | 143,754 | |||
Carrying amount | 6,139,437 | 8,461,841 | R$ 9224074 | ||
Foreign currency swaps US $ | |||||
Derivatives financial instruments | |||||
Notional Value | 98,576 | ||||
Carrying amount | 98,615 | ||||
Foreign currency swaps Euro | |||||
Derivatives financial instruments | |||||
Notional Value | 69,218 | ||||
Foreign currency swaps maturing through February 13, 2019 | |||||
Derivatives financial instruments | |||||
Notional Value | 236,363 | ||||
Currency risk affecting net amount payable | € | € 69,324 | ||||
Currency risk affecting net amount receivable | $ | $ 239,884 | ||||
Foreign currency swaps maturing through 2019 to hedge the risk of IPCA | |||||
Derivatives financial instruments | |||||
Notional Value | 40,741 | ||||
Carrying amount | 41,121 | ||||
Foreign currency swaps maturing through 2019 to hedge the risk of TJLP | |||||
Derivatives financial instruments | |||||
Notional Value | 167,070 | ||||
Carrying amount | 159,789 | ||||
Foreign currency swaps maturing in 2033 to hedge risk of change in finance lease rate pegged to IPCA | |||||
Derivatives financial instruments | |||||
Notional Value | 234,865 | ||||
Carrying amount | 233,690 | ||||
Foreign currency swaps maturing 2016 through 2018 to hedge IGP-DI | |||||
Derivatives financial instruments | |||||
Notional Value | 42,842 | ||||
Long position | |||||
Derivatives financial instruments | |||||
Notional Value | 1,184,064 | 1,181,056 | |||
Accumulated effects from fair value Amount receivable or payable | 95,533 | 164,405 | |||
Current | 69,065 | 87,643 | |||
Non Current | 26,468 | 76,762 | |||
Long position | Floating interest rate | |||||
Derivatives financial instruments | |||||
Notional Value | 699,595 | 657,868 | |||
Accumulated effects from fair value Amount receivable or payable | 7,737 | 28,263 | |||
Long position | CDI | |||||
Derivatives financial instruments | |||||
Notional Value | 554,336 | 263,518 | |||
Accumulated effects from fair value Amount receivable or payable | 82 | ||||
Long position | TJLP | |||||
Derivatives financial instruments | |||||
Notional Value | 145,259 | 394,350 | |||
Accumulated effects from fair value Amount receivable or payable | 7,737 | 28,181 | |||
Long position | Inflation rates | |||||
Derivatives financial instruments | |||||
Notional Value | 149,275 | 197,039 | |||
Accumulated effects from fair value Amount receivable or payable | 37,260 | 33,266 | |||
Long position | IPCA | |||||
Derivatives financial instruments | |||||
Notional Value | 149,275 | 166,775 | |||
Accumulated effects from fair value Amount receivable or payable | 37,260 | 33,266 | |||
Long position | IGPM | |||||
Derivatives financial instruments | |||||
Notional Value | 30,264 | ||||
Long position | Foreign currency | |||||
Derivatives financial instruments | |||||
Notional Value | 335,194 | 326,149 | |||
Accumulated effects from fair value Amount receivable or payable | 50,536 | 102,876 | |||
Long position | US Dollar | |||||
Derivatives financial instruments | |||||
Notional Value | 241,332 | 201,445 | |||
Accumulated effects from fair value Amount receivable or payable | 24,608 | 49,110 | |||
Long position | Euro | |||||
Derivatives financial instruments | |||||
Notional Value | 51,971 | 11,000 | |||
Accumulated effects from fair value Amount receivable or payable | 449 | ||||
Long position | LIBOR US$ | |||||
Derivatives financial instruments | |||||
Notional Value | 41,891 | 113,704 | |||
Accumulated effects from fair value Amount receivable or payable | 25,928 | 53,317 | |||
Short position | |||||
Derivatives financial instruments | |||||
Notional value for short position | (1,184,064) | (1,181,056) | |||
Short position | (39,383) | (20,651) | |||
Current | (16,538) | (5,239) | |||
Non Current | (22,845) | (15,412) | |||
Short position | Floating interest rate | |||||
Derivatives financial instruments | |||||
Notional value for short position | (608,782) | (860,686) | |||
Short position | (24,916) | (15,819) | |||
Short position | CDI | |||||
Derivatives financial instruments | |||||
Notional value for short position | (608,782) | (860,686) | |||
Short position | (24,916) | (15,819) | |||
Short position | Foreign currency | |||||
Derivatives financial instruments | |||||
Notional value for short position | (575,282) | (320,370) | |||
Short position | (14,467) | (4,832) | |||
Short position | US Dollar | |||||
Derivatives financial instruments | |||||
Notional value for short position | (439,103) | (183,824) | |||
Short position | (9,396) | (2,471) | |||
Short position | Euro | |||||
Derivatives financial instruments | |||||
Notional value for short position | (115,233) | (79,694) | |||
Short position | (222) | (464) | |||
Short position | LIBOR US$ | |||||
Derivatives financial instruments | |||||
Notional value for short position | (20,946) | (56,852) | |||
Short position | R$ 4849 | R$ 1897 |
FINANCIAL INSTRUMENTS AND RIS_5
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Breakdown of swaps (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Derivative financial instruments break down of swaps | ||
Total | R$ 56150 | R$ 143754 |
Ineffective portion of hedge | 2,449 | 1,289 |
(Net) result of transactions with derivatives | 10,788 | R$ 41985 |
Foreign currency x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 48,465 | |
CDI x Foreign Currency | ||
Derivative financial instruments break down of swaps | ||
Total | (14,418) | |
TJLP x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 7,737 | |
IPCA x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 14,366 | |
2,019 | ||
Derivative financial instruments break down of swaps | ||
Total | 52,526 | |
2019 | Foreign currency x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 48,465 | |
2019 | CDI x Foreign Currency | ||
Derivative financial instruments break down of swaps | ||
Total | (14,418) | |
2019 | TJLP x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 7,737 | |
2019 | IPCA x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 10,742 | |
2,020 | ||
Derivative financial instruments break down of swaps | ||
Total | 1,679 | |
2020 | IPCA x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 1,679 | |
2,021 | ||
Derivative financial instruments break down of swaps | ||
Total | 1,753 | |
2021 | IPCA x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | 1,753 | |
2022 onwards | ||
Derivative financial instruments break down of swaps | ||
Total | 192 | |
2022 onwards | IPCA x CDI | ||
Derivative financial instruments break down of swaps | ||
Total | R$ 192 |
FINANCIAL INSTRUMENTS AND RIS_6
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Sensitivity analysis net exposure (Details) R$ in Thousands | 12 Months Ended |
Dec. 31, 2018BRL (R$)item | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Percentage of risk deterioration for scenario one | 25.00% |
Percentage of risk deterioration for scenario two | 50.00% |
Number of scenarios | item | 3 |
Probable | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | R$ 1216 |
Net exposure in us dollars hedge short position | 5,072 |
Net exposure in IPCA | (80,193) |
Net exposure in UMBND | 1,962 |
Net exposure in TJLP | (785,440) |
Net exposure in hedge CDI position | (650,477) |
Total net exposure in each scenario | (1,510,292) |
Probable | Hedge (long position) derivatives depreciation risk in Euro [member] | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (69,218) |
Probable | Debt appreciation risk for payables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (20,747) |
Probable | Debt depreciation risk for receivables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | 88,749 |
Probable | Hedge (short position) derivatives depreciation risk in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (234,813) |
Probable | Debt appreciation risk for payables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (112,981) |
Probable | Debt depreciation risk for receivables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | 352,866 |
Probable | Hedge (long position) derivatives risk of decrease risk in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | 273,712 |
Probable | Debt risk of increase in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | (353,905) |
Probable | Hedge (long position) derivatives risk of decrease risk in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | 98,576 |
Probable | Debt risk of increase in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | (96,614) |
Probable | Hedge (long position) derivatives risk of decrease risk in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | 152,558 |
Probable | Debt risk of increase in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | (937,998) |
Probable | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (125,631) |
Probable | Hedge IPCA short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (273,712) |
Probable | Hedge UMBND short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (98,576) |
Probable | Hedge TJLP short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (152,558) |
25% depreciation | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (1,520) |
Net exposure in us dollars hedge short position | 6,339 |
Net exposure in IPCA | (80,193) |
Net exposure in UMBND | 1,752 |
Net exposure in TJLP | (785,415) |
Net exposure in hedge CDI position | (630,797) |
Total net exposure in each scenario | (1,489,834) |
Net effect on changes in current fair value | 20,458 |
25% depreciation | Hedge (long position) derivatives depreciation risk in Euro [member] | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (86,522) |
25% depreciation | Debt appreciation risk for payables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (25,934) |
25% depreciation | Debt depreciation risk for receivables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | 110,936 |
25% depreciation | Hedge (short position) derivatives depreciation risk in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (293,516) |
25% depreciation | Debt appreciation risk for payables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (141,227) |
25% depreciation | Debt depreciation risk for receivables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | 441,082 |
25% depreciation | Hedge (long position) derivatives risk of decrease risk in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | 254,731 |
25% depreciation | Debt risk of increase in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | (334,924) |
25% depreciation | Hedge (long position) derivatives risk of decrease risk in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | 98,396 |
25% depreciation | Debt risk of increase in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | (96,644) |
25% depreciation | Hedge (long position) derivatives risk of decrease risk in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | 151,975 |
25% depreciation | Debt risk of increase in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | (937,390) |
25% depreciation | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (125,695) |
25% depreciation | Hedge IPCA short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (254,731) |
25% depreciation | Hedge UMBND short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (98,396) |
25% depreciation | Hedge TJLP short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (151,975) |
50% depreciation | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (1,824) |
Net exposure in us dollars hedge short position | 7,608 |
Net exposure in IPCA | (80,193) |
Net exposure in UMBND | 1,746 |
Net exposure in TJLP | (785,390) |
Net exposure in hedge CDI position | (613,506) |
Total net exposure in each scenario | (1,471,559) |
Net effect on changes in current fair value | 38,733 |
50% depreciation | Hedge (long position) derivatives depreciation risk in Euro [member] | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (103,827) |
50% depreciation | Debt appreciation risk for payables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | (31,121) |
50% depreciation | Debt depreciation risk for receivables in Euro | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in euro | 133,123 |
50% depreciation | Hedge (short position) derivatives depreciation risk in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (352,219) |
50% depreciation | Debt appreciation risk for payables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | (169,472) |
50% depreciation | Debt depreciation risk for receivables in US dollars | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in us dollars hedge short position | 529,299 |
50% depreciation | Hedge (long position) derivatives risk of decrease risk in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | 238,133 |
50% depreciation | Debt risk of increase in IPCA | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in IPCA | (318,326) |
50% depreciation | Hedge (long position) derivatives risk of decrease risk in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | 98,217 |
50% depreciation | Debt risk of increase in UMBND | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in UMBND | (96,471) |
50% depreciation | Hedge (long position) derivatives risk of decrease risk in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | 151,402 |
50% depreciation | Debt risk of increase in TJLP | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in TJLP | (936,792) |
50% depreciation | Hedge US $ and Euro (short and long position) derivative risk decrease in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (125,754) |
50% depreciation | Hedge IPCA short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (238,133) |
50% depreciation | Hedge UMBND short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | (98,217) |
50% depreciation | Hedge TJLP short position derivatives risk of increase in CDI | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Net exposure in hedge CDI position | R$ 151402 |
FINANCIAL INSTRUMENTS AND RIS_7
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Sensitivity analysis assumptions (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Probable | IPCA | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 3.69% |
Probable | IGPM | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 7.54% |
Probable | IGP-DI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 712.00% |
Probable | UMBND | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 0.0756 |
Probable | CDI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 6.42% |
Probable | US Dollar | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 3.8748 |
Probable | Euro | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 4.4370 |
25% depreciation | IPCA | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 4.62% |
25% depreciation | IGPM | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 9.42% |
25% depreciation | IGP-DI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 891.00% |
25% depreciation | UMBND | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 0.0946 |
25% depreciation | CDI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 8.03% |
25% depreciation | US Dollar | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 4.8435 |
25% depreciation | Euro | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 5.5463 |
50% depreciation | IPCA | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 5.54% |
50% depreciation | IGPM | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 11.31% |
50% depreciation | IGP-DI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 1069.00% |
50% depreciation | UMBND | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 0.1135 |
50% depreciation | CDI | |
Sensitivity analysis assumptions | |
Risk Variable (as a percent) | 9.63% |
50% depreciation | US Dollar | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 5.8122 |
50% depreciation | Euro | |
Sensitivity analysis assumptions | |
Risk Variable Ratio | 6.6556 |
FINANCIAL INSTRUMENTS AND RIS_8
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Fair value (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Transfers from level 1 to 2 assets | R$ 0 | R$ 0 |
Transfers from level 2 to 1 assets | 0 | 0 |
Transfers from level 1 to 2 liabilities | 0 | 0 |
Transfers from level 2 to 1 liabilities | 0 | 0 |
Transfers in to level 3 | 0 | 0 |
Transfers out of level 3 | R$ 0 | R$ 0 |
FINANCIAL INSTRUMENTS AND RIS_9
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Composition of consolidated financial assets and liabilities (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Financial assets Book value | R$ 12284429 | R$ 13158583 |
Financial assets Fair value | 12,284,429 | 13,158,583 |
Financial liabilities Book value | 13,821,602 | 15,929,592 |
Fair value of financial liabilities | 13,830,792 | 15,933,941 |
Cash and cash equivalents | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial assets Book value | 3,381,328 | 4,050,338 |
Current financial assets Fair value | 3,381,328 | 4,050,338 |
Investments pledged as collateral | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Noncurrent financial assets Book value | 76,934 | 81,486 |
Noncurrent financial assets Fair value | 76,934 | 81,486 |
Trade accounts receivable | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial assets Book value | 8,304,382 | 8,588,466 |
Noncurrent financial assets Book value | 426,252 | 273,888 |
Current financial assets Fair value | 8,304,382 | 8,588,466 |
Noncurrent financial assets Fair value | 426,252 | 273,888 |
Derivative financial instruments | Measured at fair value through profit or loss | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial assets Book value | 2,480 | |
Current financial assets Fair value | 2,480 | |
Derivative financial instruments | Measured at fair value through OCI | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial assets Book value | 69,065 | 85,163 |
Noncurrent financial assets Book value | 26,468 | 76,762 |
Current financial assets Fair value | 69,065 | 85,163 |
Noncurrent financial assets Fair value | 26,468 | 76,762 |
Trade accounts payable | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 7,642,782 | 7,447,100 |
Current financial liabilities Fair value | 7,642,782 | 7,447,100 |
Loans and financing | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 1,076,451 | 1,316,034 |
Noncurrent financial liabilities Book value | 817,908 | 1,353,582 |
Current financial liabilities Fair value | 1,135,732 | 1,463,609 |
Noncurrent financial liabilities Fair value | 796,481 | 1,291,974 |
Loans and financing | Measured at fair value through profit or loss | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 263,754 | 304,921 |
Noncurrent financial liabilities Book value | 341,728 | 520,421 |
Current financial liabilities Fair value | 263,754 | 304,921 |
Noncurrent financial liabilities Fair value | 341,728 | 520,421 |
Debentures | Amortized cost | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 82,840 | 1,412,174 |
Noncurrent financial liabilities Book value | 3,049,949 | 3,068,243 |
Current financial liabilities Fair value | 237,144 | 1,532,427 |
Noncurrent financial liabilities Fair value | 2,866,981 | 2,866,372 |
Debentures | Measured at fair value through profit or loss | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 41,121 | 312 |
Noncurrent financial liabilities Book value | 40,010 | |
Current financial liabilities Fair value | 41,121 | 312 |
Noncurrent financial liabilities Fair value | 40,010 | |
Derivative financial instruments | Measured at fair value through profit or loss | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 16,316 | 4,504 |
Current financial liabilities Fair value | 16,316 | 4,504 |
Derivative financial instruments | Measured at fair value through OCI | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Current financial liabilities Book value | 222 | 735 |
Noncurrent financial liabilities Book value | 22,845 | 15,412 |
Current financial liabilities Fair value | 222 | 735 |
Noncurrent financial liabilities Fair value | 22,845 | 15,412 |
Contingent consideration | Measured at fair value through profit or loss | Level 2 | ||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||
Noncurrent financial liabilities Book value | 465,686 | 446,144 |
Noncurrent financial liabilities Fair value | R$ 465686 | R$ 446144 |
FINANCIAL INSTRUMENTS AND RI_10
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Capital Management (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||||
Cash and cash equivalents | R$ 3381328 | R$ 4050338 | R$ 5105110 | R$ 5336845 |
Loans, financing, debentures, financial lease and contingent consideration | (6,139,437) | (8,461,841) | (9,224,074) | |
Derivative financial instruments, net | 56,150 | 143,754 | ||
Short-term investments pledged as collateral | 76,934 | 81,486 | ||
EQUITY | 71,607,027 | 69,461,358 | R$ 69244419 | R$ 68567242 |
Capital management | ||||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||||
Cash and cash equivalents | 3,381,328 | 4,050,338 | ||
Loans, financing, debentures, financial lease and contingent consideration | (6,139,437) | (8,461,841) | ||
Derivative financial instruments, net | 56,150 | 143,754 | ||
Asset guarantor of contingent consideration | 465,686 | 446,144 | ||
Net debt | 2,223,800 | 3,809,883 | ||
EQUITY | R$ 71607027 | R$ 69461358 | ||
Net debt-to-equity ratio | 3.11% | 5.48% | ||
Financing - BNB maturing 8/18/2022 | Capital management | ||||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | ||||
Short-term investments pledged as collateral | R$ 12473 | R$ 11722 |
FINANCIAL INSTRUMENTS AND RI_11
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Currency and Interest Risk (Details) € in Thousands, R$ in Thousands, $ in Thousands | 12 Months Ended | ||||||||||||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2018EUR (€) | Dec. 31, 2018BRL (R$) | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017EUR (€) | Dec. 31, 2017BRL (R$) | Sep. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |||||||||||||
Cash and cash equivalents | R$ 3381328 | R$ 4050338 | R$ 5105110 | R$ 5336845 | |||||||||
Currency Risk | |||||||||||||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |||||||||||||
Foreign currency denominated financial debt (as a percent) | 1.50% | 2.70% | |||||||||||
Total indebtedness in foreign currency | R$ 96615 | R$ 225254 | |||||||||||
Net balance of these rights and obligations receivable | $ 61,909 | $ 16,953 | € 15,624 | € 17,535 | |||||||||
Interest Risk | |||||||||||||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |||||||||||||
Borrowings, interest rate | 6.98% | 7.00% | 6.98% | 6.98% | 6.56% | 6.60% | 6.75% | 7.00% | 7.00% | 7.00% | 7.50% | ||
CDI | Interest Risk | |||||||||||||
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |||||||||||||
Cash and cash equivalents | R$ 3175730 | R$ 3932539 |
FINANCIAL INSTRUMENTS AND RI_12
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Liquidity Risk (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Risk management policy | ||
Financial liabilities | R$ 13821602 | R$ 15929592 |
Liquidity Risk | ||
Risk management policy | ||
Financial liabilities | 14,487,638 | |
Liquidity Risk | Trade accounts payable | ||
Risk management policy | ||
Financial liabilities | 7,642,782 | |
Liquidity Risk | Loans, financing and finance lease | ||
Risk management policy | ||
Financial liabilities | 2,662,371 | |
Liquidity Risk | Contingent consideration | ||
Risk management policy | ||
Financial liabilities | 465,686 | |
Liquidity Risk | Debentures | ||
Risk management policy | ||
Financial liabilities | 3,677,416 | |
Liquidity Risk | Derivative financial instruments | ||
Risk management policy | ||
Financial liabilities | 39,383 | |
2019 | Liquidity Risk | ||
Risk management policy | ||
Financial liabilities | 9,314,738 | |
2019 | Liquidity Risk | Trade accounts payable | ||
Risk management policy | ||
Financial liabilities | 7,642,782 | |
2019 | Liquidity Risk | Loans, financing and finance lease | ||
Risk management policy | ||
Financial liabilities | 1,410,011 | |
2019 | Liquidity Risk | Debentures | ||
Risk management policy | ||
Financial liabilities | 245,407 | |
2019 | Liquidity Risk | Derivative financial instruments | ||
Risk management policy | ||
Financial liabilities | 16,538 | |
2020 | Liquidity Risk | ||
Risk management policy | ||
Financial liabilities | 1,688,270 | |
2020 | Liquidity Risk | Loans, financing and finance lease | ||
Risk management policy | ||
Financial liabilities | 451,411 | |
2020 | Liquidity Risk | Debentures | ||
Risk management policy | ||
Financial liabilities | 1,236,859 | |
From 2 to 5 years | Liquidity Risk | ||
Risk management policy | ||
Financial liabilities | 2,803,003 | |
From 2 to 5 years | Liquidity Risk | Loans, financing and finance lease | ||
Risk management policy | ||
Financial liabilities | 607,853 | |
From 2 to 5 years | Liquidity Risk | Debentures | ||
Risk management policy | ||
Financial liabilities | 2,195,150 | |
Over five years | Liquidity Risk | ||
Risk management policy | ||
Financial liabilities | 681,627 | |
Over five years | Liquidity Risk | Loans, financing and finance lease | ||
Risk management policy | ||
Financial liabilities | 193,096 | |
Over five years | Liquidity Risk | Contingent consideration | ||
Risk management policy | ||
Financial liabilities | 465,686 | |
Over five years | Liquidity Risk | Derivative financial instruments | ||
Risk management policy | ||
Financial liabilities | R$ 22845 |
FINANCIAL INSTRUMENTS AND RI_13
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Social and Environmental Risks (Details) R$ in Thousands | Dec. 31, 2018BRL (R$) |
Environmental risks | |
Exposure to contingent liabilities | |
Maximum fine per breach of environmental law | R$ 50000 |
FINANCIAL INSTRUMENTS AND RI_14
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT - Insurance Coverage (Details) R$ in Thousands | Dec. 31, 2018BRL (R$) |
FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT | |
Maximum limits of claims for operational risks | R$ 850000 |
Maximum limits of claims for general civil liability risks | R$ 75000 |
LEASE (Details)
LEASE (Details) - BRL (R$) R$ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
LEASE | ||
Financing lease assets amount | R$ 269076 | R$ 280103 |
COMMITMENTS AND GUARANTEES (R_3
COMMITMENTS AND GUARANTEES (RENTALS) - Non-cancellable operating agreements (Details) R$ in Thousands | Dec. 31, 2018BRL (R$) |
Non-cancellable operating agreements | |
Amount corresponding to contracts | R$ 12591561 |
2,019 | |
Non-cancellable operating agreements | |
Amount corresponding to contracts | 2,579,046 |
From 1 to 5 years | |
Non-cancellable operating agreements | |
Amount corresponding to contracts | 7,201,868 |
Over five years | |
Non-cancellable operating agreements | |
Amount corresponding to contracts | R$ 2810647 |
ADDITIONAL INFORMATION ON CAS_3
ADDITIONAL INFORMATION ON CASH FLOWS (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | R$ 10714203 | R$ 11390728 |
Cash flows from financing activities, Additions | 3,055,876 | |
Cash flows from financing activities, Write-offs (payments) | (6,934,104) | (8,313,454) |
Cash flows from operating activities, Write-offs (payments) | (494,931) | (857,500) |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 532,288 | 984,400 |
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing | 525,069 | 584,906 |
Financing activities not involving cash and cash equivalents, Business combinations | (389) | |
Financing activities not involving cash and cash equivalents, Interim and unclaimed dividends and interest on equity | 5,913,678 | 3,869,636 |
Balance at end of the year | 10,256,203 | 10,714,203 |
Financing transactions with suppliers | 506,397 | 571,444 |
Acquisition of assets through financial leases | 18,672 | 13,462 |
Total | 525,069 | 584,906 |
Interim dividends and interest on equity | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | 2,396,116 | 2,195,031 |
Cash flows from financing activities, Write-offs (payments) | (4,136,878) | (3,668,551) |
Financing activities not involving cash and cash equivalents, Interim and unclaimed dividends and interest on equity | 5,913,678 | 3,869,636 |
Balance at end of the year | 4,172,916 | 2,396,116 |
Loans and financing | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | 3,109,498 | 4,880,606 |
Cash flows from financing activities, Additions | 55,876 | |
Cash flows from financing activities, Write-offs (payments) | (1,533,121) | (2,449,773) |
Cash flows from operating activities, Write-offs (payments) | (207,708) | (333,676) |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 231,748 | 385,021 |
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing | 506,397 | 571,444 |
Balance at end of the year | 2,106,814 | 3,109,498 |
Finance lease | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | 385,460 | 374,428 |
Cash flows from financing activities, Write-offs (payments) | (35,375) | (35,722) |
Cash flows from operating activities, Write-offs (payments) | (21,231) | (11,973) |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 45,501 | 45,265 |
Financing activities not involving cash and cash equivalents, Additions of financial lease and supplier financing | 18,672 | 13,462 |
Balance at end of the year | 393,027 | 385,460 |
Debentures | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | 4,520,739 | 3,554,307 |
Cash flows from financing activities, Additions | 3,000,000 | |
Cash flows from financing activities, Write-offs (payments) | (1,324,723) | (2,000,000) |
Cash flows from operating activities, Write-offs (payments) | (265,992) | (513,937) |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 243,886 | 480,369 |
Balance at end of the year | 3,173,910 | 4,520,739 |
Derivative financial instruments | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | (143,754) | (28,377) |
Cash flows from financing activities, Write-offs (payments) | 95,993 | (159,408) |
Cash flows from operating activities, Write-offs (payments) | 2,086 | |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 8,389 | 42,334 |
Financing activities not involving cash and cash equivalents, Business combinations | (389) | |
Balance at end of the year | (56,150) | (143,754) |
Contingent consideration | ||
ADDITIONAL INFORMATION ON CASH FLOWS | ||
Balance at beginning of the year | 446,144 | 414,733 |
Financing activities not involving cash and cash equivalents, Financial charges and foreign exchange variation | 19,542 | 31,411 |
Balance at end of the year | R$ 465686 | R$ 446144 |
ADDITIONAL INFORMATION ON THE_3
ADDITIONAL INFORMATION ON THE CONSOLIDATED INCOME STATEMENT - IFRS 15 (Details) - BRL (R$) R$ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Income | |||
Net operating income | R$ 43462740 | R$ 43206832 | R$ 42508459 |
Cost of sales | (21,025,767) | (20,272,530) | (20,823,014) |
Gross profit | 22,436,973 | 22,934,302 | 21,685,445 |
Operating income (expenses) | (12,980,789) | (16,302,065) | (15,317,426) |
Selling expenses | (12,832,741) | (13,136,474) | (12,455,366) |
General and administrative expenses | (2,598,970) | (2,443,105) | (2,793,386) |
Other operating income | 4,077,003 | 464,182 | 968,479 |
Other operating expenses | (1,626,081) | (1,186,668) | (1,037,153) |
Operating income | 9,456,184 | 6,632,237 | 6,368,019 |
Financial income | 4,112,640 | 1,755,958 | 2,781,359 |
Finance expenses | (2,285,487) | (2,659,002) | (4,015,900) |
Equity pickup | (5,847) | 1,580 | 1,244 |
Income before taxes | 11,277,490 | 5,730,773 | 5,134,722 |
Income and social contribution taxes | (2,349,232) | (1,121,983) | (1,049,480) |
Net income for the year | 8,928,258 | R$ 4608790 | R$ 4085242 |
IFRS adjustments 15 | |||
Consolidated Statements of Income | |||
Net operating income | (14,750) | ||
Gross profit | (14,750) | ||
Operating income (expenses) | (71,234) | ||
Selling expenses | (71,234) | ||
Operating income | (85,984) | ||
Income before taxes | (85,984) | ||
Income and social contribution taxes | 29,234 | ||
Net income for the year | (56,750) | ||
Previously stated | |||
Consolidated Statements of Income | |||
Net operating income | 43,447,990 | ||
Cost of sales | (21,025,767) | ||
Gross profit | 22,422,223 | ||
Operating income (expenses) | (13,052,023) | ||
Selling expenses | (12,903,975) | ||
General and administrative expenses | (2,598,970) | ||
Other operating income | 4,077,003 | ||
Other operating expenses | (1,626,081) | ||
Operating income | 9,370,200 | ||
Financial income | 4,112,640 | ||
Finance expenses | (2,285,487) | ||
Equity pickup | (5,847) | ||
Income before taxes | 11,191,506 | ||
Income and social contribution taxes | (2,319,998) | ||
Net income for the year | R$ 8871508 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Interest on equity R$ / shares in Units, R$ in Thousands | Feb. 15, 2019BRL (R$)R$ / shares |
SUBSEQUENT EVENTS | |
Gross interest on equity | R$ | R$ 700000 |
Net interest on equity | R$ | R$ 595000 |
Common shares | |
SUBSEQUENT EVENTS | |
Gross interest on equity, per share | R$ 0.38875331124 |
Net interest on equity, per share | 0.33044031449 |
Preferred shares | |
SUBSEQUENT EVENTS | |
Gross interest on equity, per share | 0.42762864241 |
Net interest on equity, per share | R$ 0.36348434584 |