Annual Report Annual Report is available online on www.orange.sk/vs2017 2017 Annual Report
Table of Contents
1 Orange Slovensko 5 Customer Care 6 – 17 We know where we are heading and what our goal is 40 – 43 The higher we go, the better services we bring to the people
2 Letter from the CEO 6 Employees 18 – 23 With good navigation we can not get lost, even in unexplored waters 44 – 49 With a common vision, we are fast approaching our goals
3 Slovak Telecommunications Market 7 Responsible Business 24 – 29 We understand the market signals and with flexibility, respond to them 50 – 63 We feel the need to protect what we care about and, to develop what is beautiful 4 Orange Slovensko in the Telecommunications Market 30 – 39 Innovation moves us further and improves the lives of our customers 8 Financial Statement 64 – 122 It is time for us to look at how we succeeded in 2017
4 5 Orange 1Slovensko We know where we are heading and what our goal is 2017 Chapter I Annual Report
Orange Slovensko, a.s., Description of the Company A Member of the Global Orange Group Orange Slovensko, a.s. is the leading telecom- 98% of Slovakia's population, while Orange's munications company and biggest mobile net- 4G network is already available to 90% of Slo- work operator in Slovakia. vaks. Orange Slovensko, a.s. was the first tele- Registered Office communications operator in Slovakia to launch Metodova 8, 821 08 Bratislava, The Slovak Republic It started its commercial operation on the Slo- a state-of-the-art new generation fixed net- vak market in 1997. As of 31 December 2017, work on the basis of FTTH (Fibre To The Home Company Identification Number (IČO) Orange Slovensko, a.s. registered 2,834 mil- – optics for home), which currently covers over 35697270 lion of active mobile network customers and 370 thousand households across 34 towns another 193 thousand fixed Internet and digital in Slovakia. Orange also provides fixed inter- Date of Entry in the Commercial Register of the Slovak Republic television customers. As of 31 December 2017, net and digital television through DSL which is 3 September 1996 the revenue of Orange Slovensko, a.s. reached available across most of Slovakia. EUR 554,7 million. Legal Form The quality of services of Orange Slovensko, Joint-stock Company Orange Slovensko, a.s. is a member of the a.s. complies with the ISO 9001:2000 certifica- global Orange Group, one of the biggest mo- tion criteria, and the company also holds the Identification of the Entry in the Commercial Register bile network operators and broadband internet Environmental Management Certificate pursu- Registered in Bratislava I District Court Commercial Register, providers in Europe. As of 31 December 2017, ant to ISO 14001:2004. With its Orange Foun- Section: Sa, Insert No.: 1142/B the Orange Group had revenues of EUR 41 bil- dation, Orange Slovensko, a.s. is a leader in lion, with 273 million customers using its ser- the field of corporate social responsibility and vices in 29 countries of the world. corporate philanthropy in Slovakia.
Orange is the leading mobile broadband Inter- Orange Slovensko, a.s. is wholly owned by the net provider, using 3G and 4G networks. High- Orange Group. speed mobile Internet coverage exceeded
8 9 2017 Chapter I Annual Report
Company Bodies Company Management
Board of Directors Pavol Lančarič Vladislav Kupka Chairman: Pavol Lančarič Chief Executive Officer Director of Customer Service Department Members: Ivan Golian Zuzana Nemečková Ivan Golian Miloš Lalka Vladislav Kupka ITN Director and Deputy CEO Director of Communications and Brand Department Reza Samdjee Zuzana Nemečková Ivan Marták Director of Commercial Department Director of Strategies, and Regulatory Affairs and Deputy CEO Department Supervisory Board Ivana Braunsteinerová Reza Samdjee Chairman: Bruno Duthoit Director of Human Resources Department Director of Financial Department Vice-chairman: Christophe Naulleau Members: Ľuboš Dúbravec Francis Gelibter Štefan Hronček Marián Luptovský Ladislav Rehák Marc Ricau Maï de La Rochefordière
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Ivan Golian ITN Director and Deputy CEO
Born in 1964. He completed his university education at the Slovak Technical University in Bratislava and achieved his PhD at the De- Pavol Lančarič partment of Applied Informatics and Automation at FMT STU. Be- Chief Executive Officer and Chairman of the Board ginning in 1993, he worked at the Department of Electronics and Automation KIHO in Gent, Belgium, and around two years later he Born in 1963. He graduated from the Faculty of Commerce at the began work at Digital Equipment Corporation as a project manager University of Economics in Bratislava and received his PhD in 1991. for the banking and telecommunications sectors. In 1997, he joined Between 1990 and 1992, he was a member of the Advisory Com- Orange Slovensko, a.s., where he worked for more than eight years mittee of the Prime Minister at the Slovak Government Office. Since as a member of the senior management, ITN Director and Chief Op- 1993, he has taken management positions in various multi-national erations Officer (CIO/CTO/COO). In 2005, he became the Deputy companies. Since 1997, he has been working at Orange Slovensko, Chief Executive Officer. Beginning in 2006, he was the VUB Bank´s a.s., where he started as Sales Director. Since 1999, he has been board member and also worked as Director of Information Technol- the CEO of Orange Slovensko, a.s., also serving as a Chairman of ogies and Operations there. Since January 2009, he has been the the Board. ITN Director at Orange Slovensko, a.s. and he is also the Deputy CEO and a Board member.
12 13 2017 Chapter I Annual Report
Zuzana Nemečková Andrea Danielová Director of Commercial Department and Deputy CEO Director of Human Resources Department (until September 2017)
Born in 1970. She completed her studies at the Faculty of Commerce Born in 1967. She completed her studies at the later Globtel, a.s., and Orange Slovensko, of the University of Economics in Bratislava. She started working as University of Economics in Bratislava. She has a.s.. From 2003 to 2007, she also worked as an Executive Assistant in 1993 and later as Marketing Manager at worked in human resources since 1991. Since Director of Human Resources Department at Tchibo Slovensko spol. s r.o. She became Director of Sales, Market- 1996, she had worked as Deputy Director of Hu- Orange Slovensko, a.s. ing, and the Communication Department at Rajo a.s. in 1996. She man Resources Department at Globtel GSM, has worked as Director of the Commercial Department at Orange Slovensko, a.s. since 2001.
Vladislav Kupka Director of Customer Service Department
Born in 1974. He completed his studies at the Faculty of Philosophy of the University of St. Cyril and Methodius in Trnava. He started Ivana Braunsteinerová working in sales in 1994 and has worked at Orange Slovensko, a.s. Director of Human Resources (since January 2018) since 1996. He started as a customer centre employee, and contin- ued as Back Office adviser a year later, then he worked as Deputy Born in 1974. She achieved a master's degree at the Faculty of Arts Manager. He worked as Back Office Manager between 2001-2006, of Comenius University in Bratislava. She has been working in the later as Manager of the B2C Department, and has worked as Direc- field of human resources management since 2002 and has been ac- tor of the Customer Service Department at Orange Slovensko, a.s. tive in several automotive companies and retail businesses. Since since July 2008. 2011 she had been working as HR Country Manager at Lidl Slovak Republic, v.o.s. She started in the position of the Human Resources Director at Orange Slovensko, a. s., in 2018.
14 15 2017 Chapter I Annual Report
Miloš Lalka Director of Communications and Brand Department Reza Samdjee Born in 1975. He completed his studies in 1998 at the Faculty of Chief Financial Officer (since August 2017) Management of Comenius University in Bratislava. He has worked at Orange Slovensko, a.s. since 2003, starting as Advertising Man- Born in 1974. He obtained a master's degree at the Sorbonne ager. He became Deputy Director of Communications and Brands University. From 1998 to 2000 he worked as a financial controller Department in 2012. He has worked as Director of Communications for CROWN CORK & SEAL in Oxford. From 2000 to 2017 he and Brands Department at Orange Slovensko, a.s. since 2013. worked in Orange France where he held several positions, with the position of the Controlling Director for the B2B market in France as his last. In Orange Slovensko, a.s., he has been working in the position of Chief Financial Officer since 2017.
Ivan Marták Director of Strategy, Legal and Regulatory Affairs Department
Born in 1964. He completed his studies of journalism at the Faculty of Antoine Guillaume Guilbaud Philosophy of the Comenius University in Bratislava. He accquired his Director of the Financial Department (until July 2017) technical education in the field of telecommunications at the Slovak University of Technology in Bratislava. He worked at the Internation- Born in 1972. He completed his university involved controlling and network cost model- al Telecommunication Union from 1992 and at the Telecommunica- studies at the Paris Institute of Political Stud- ling. Since 2006, he had also worked as a man- tions Executive Management Institute of Canada in Montreal in 1995. ies and was awarded a master's degree. He ager and later Director of Control at Mobistar, He has fulfilled various managerial functions at Slovenské telekomu- worked in an executive position at the Financial Brussels. He has worked at Orange Slovensko, nikácie, š.p. since 1993. He has worked as Director of Strategies and Department of France Telecom between 1998- a.s. from 2012 to 2017 as Financial Director. Regulatory Affairs Department at Orange Slovensko, a.s. since 2001. 2000, later at Orange, Paris, where his duties
16 17 Letter from the CEO 2With good navigation we can not get lost, even in unexplored waters 2017 Chapter II Annual Report
Letter from the CEO Ladies and gentlemen, gradual transition to convergence is the trend dear shareholders, in the market. Our continued leadership in the customers and employees, mobile service market is a key presumption for our success also in the converged market. on the high-end telecommunication market I am delighted that it was us who introduced where we have been operating along with many the latest trends in the sector, which charac- other players, there had long been a fight for terizes mobile and fixed service combination. every single customer. The customer expec- The transition to pre-combined offers has en- tations keep rising with new solutions on the abled technological development, particularly market. Customers become increasingly de- in the area of high-speed fixed internet con- manding, and their telecommunication behav- nection. At the end of 2017, an optical Inter- iour is changing. What was enough for them net connection through the Orange network yesterday is no longer true. But one thing is still could be used by around 367,000 households, common there, their demands are increasing, and access to fixed high-speed 4G internet they expect from operators the highest qual- accounted for up to 90% of the population of ity and solutions that make their life easier. Slovakia. Customers no longer need to be ex- I am very glad, that thanks to our strategic fo- perts in telecommunication technology to be cus on the best user experience, they can con- able to choose the best solution for their home. centrate on what matters most to their lives, With Love Offer we gave them a helping hand we are able to lead this fight for the customer in choosing the most appropriate solution and very successfully. This is confirmed by our op- last but not least, we have saved them time erational and financial results that I will gladly and money. share with you in this report. The introduction of the Love Service Package From the perspective of the overall mobile mar- with pre-combined mobile and fixed services ket, we can see the gradual trend of stabiliza- has been one of Orange's key activities over tion of both market shares and the value. The the past year. However, I have to say with pride
20 21 2017 Chapter II Annual Report
that in 2017 Orange introduced not only useful In order to get our customers unreservedly and customers coming from competing operators to of the total revenues and they increased by 9.3% services that make life easier for families, but fully enjoying all the benefits of digital servic- Orange is also growing. In the year 2017, more year-on-year to 27.6 million EUR. also technological novelties. I'm glad it was us es offered by Orange, we are constantly ex- than 53,000 customers transferred their num- who introduced the many innovations that res- panding our high-speed Internet availability bers to Orange, which is 15% more than in the Ladies and Gentlemen, even after 20 years, onated across the telecoms market, such as and bringing it to an ever increasing number previous year. Maintaining their trust is a huge we still prove that we can fulfil our dreams. We the launch of VoLTE, VoWiFi. Thanks to them, of people. Today, we already provide the wid- commitment for us and, their satisfaction is the achieve this because we listen to our custom- we have brought customers a new communi- est broadband mobile coverage among all op- biggest reward for us. Satisfaction of our cus- ers and provide them with useful services that cation experience and even higher call quality. erators in Slovakia, available now to more than tomers is the area in which we can be most can make their lives easier. Let me take this 98% of Slovakia's population. The importance proud within the past year. We have seen not opportunity to thank the shareholders for their I would like to draw your attention to the first of network quality and availability is not only only its growth, but we have been much more trust without which we could not bring new in- test of the 5G network in Slovakia that we have confirmed by the growing volume of data trans- interested in it. Thanks to the new Staffino spirational and relevant products and services implemented. The truth is, that 5G is still most- ferred in mobile networks, but also the amount Solution, we have increased overall satisfac- to our customers, the employees who are our ly, a pleasant vision of the future, but it will un- of funds invested. Orange invested to networks tion with our channels by more than 5% over most valuable capital for their everyday work doubtedly be 5G that will define mobile com- more than 69 million EUR out of almost 96 mil- 6 months. Just to compare, the world bench- and the contribution to our common success munications and the market in general, in the lion EUR of the total investment amount. The mark is 85% and we currently achieve more and, last but not least, our customers for trust- upcoming years. I am convinced that the arriv- recognition of the quality of our network, is also than 88% satisfaction. ing us. I also look forward to further challeng- al of 5G networks will change the market set- shown by the interest in using it by competing es in 2018. I believe they will bring us the most ting. The main attributes of 5G, such as tre- operators. Last year, we made our 2G network Our operating activities are also reflected in the inspiration to help us connect people with mendous speed, high reliability and ultra-low available to customers of 4-ka and O2. financial results. After 8 years of decline, they re- everything they care about every day. latency, mean new possibilities for industri- corded a year-on-year increase. Revenues as of al process automation, autonomous cars, ap- As of December 31, 2017, Orange record- December 31, 2017 reached 554.7 million EUR plication in so called remote medicine or new ed 2,834 million active mobile customers which represents an annual increase of 0.5%. Up experiences from virtual reality, and from us- and 193,000 fixed-line customers, including to 22.2% of revenues from mobile services ac- er-generated content sharing. It was Orange 67,000 digital TV customers. We have experi- counted for revenues from mobile data services, who first introduced these possibilities of fu- enced a continued increase in mobile data ser- which reached 92.3 million EUR. The fixed ser- Pavol Lančarič ture technology and declared its readiness for vice and fixed-internet customers as well as vice revenues represent a more and more signif- CEO and Chairman of the Board implementation. combined service customers. The number of icant part of the revenues. They reach nearly 5% Orange Slovensko, a.s.
22 23 Slovak 3Telecommunications Market
We understand the market signals and with flexibility, respond to them 2017 Chapter III Annual Report
Slovak Telecommunications Market in 2017
A strong competitive environment causing The total value of the telecommunications mar- Value of the telecommunications market in Slovakia by service (in million EUR) price erosion, as well as continuing regula- ket in 2017 increased by 1 % compared to pre- 2015 2016 2017 tion, have been factors faced by the Slovak vious year and amounted to EUR 1,834 mil- 64 64 65 Data Services/Transfer telecommunications market for several years. lion. The number of customers in all segments Fixed Internet Despite these factors, which significantly affect has increased in the telecommunications mar- 178,5 184 187 Fixed Voice the activities of all players and thus the mar- ket also this year. Compared to last year it in- Mobile Data Services ket behaviour, we have seen a slight increase creased by 1.5 % and exceeded 11 million ac- 133 125 118 Mobile Voice Services in total sales compared to the previous period. tive customers. 59 62 64 Pay-TV Other Development of the value of the telecommunications market in Slovakia and the share of each operator (in million EUR)
2015 2016 2017 883 872 872 Orange Slovensko
561 552 554 Slovak Telekom O2 Slovakia UPC Broadband Slovakia Other top 13 783 766 748 130 138 150
Labelling of the chart: After a decrease in 2016, the revenues from the 245 251 270 Labelling of the chart: After a decrease 376 371 378 telecommunications service have been 47 47 47 in 2016, the telecommunications market stabilized in 2017, revenues from fixed experienced a slight increase in 2017, services and paid TV continued to grow, 188 200 215 reaching the level of 2015. recording an increase of 4.7%.
Total of 1,824 Total of 1,816 Total of 1,834 Source: Data published by operators Total of 1,824 Total of 1,816 Total of 1,834 Source: Data published by operators
26 27 2017 Chapter III Annual Report
The dominant share in the value of the tele- Slovensko, a.s. company grew at a rate of 9 %. In this market, with a market share of 41%, we 11% of this number consists of mobile Internet communications market is still kept by the seg- Thanks to the last year's strategic innovation, still keep a dominant position. Penetration of customers, whose number increased by 3.5% ment of mobile services, amounting to EUR The 4G Home Internet, in this segment, Orange active SIM cards reached 128,5%, while up to year on year. 936 million, representing 51% of the total mar- Slovakia, a.s., as a company recorded a signifi- ket value. The value of mobile voice and SMS cant increase of 9%. Development of number of customers in the telecommunications market (in thousands) has long been in decline, which is only partially offset by an increase in revenues from mobile The number of subscribers in the pay-TV seg- 2015 2016 2017 data. The stabilization of revenue from mobile ment increased year-on-year by 1 %. Pay-TV voice services is affected mainly by the chang- services are now used by nearly 93% of house- ing structure of voice plans, with an emphasis holds that have a choice of more and more pro- on the value of Internet in the mobile phone as grams, quality content and additional services well as the migration from prepaid services to such as TV archive, rental service, or access to invoiced services. The pay-TV segment as well TV on multiple devices via the Internet. The use 745 726 328 778 345 as the fixed internet segment recorded a sig- of packages combining multiple services from 306 1,715 1,011 1,724 1,721 1,017 5,818 5,775 1,273 5,657 1,338 1,398 1,005 nificant year-on-year increase. In the case of a one provider (Voice + Internet + TV) is becom- fixed Internet it was of 1.8% and, in the case of ing increasingly popular. pay-TV of up to more than 8%. The only segment we see long-term the reduc- 2017 again confirmed the growing appetite of tion in users is the fixed voice service segment. Slovaks for data services. A significant dynam- The main reason for this is the substitution of ic in the rate of growth in the number of cus- fixed lines by mobile voice services and voice Total of 10,697 Total of 10,906 Total of 11,077 tomers and in the revenue was recorded in the over IP. Mobile Voice Services Fixed Voice Services Pay-TV market for mobile data and fixed Internet. The Mobile Data Services Fixed Internet Other (m2m) fixed Internet segment recorded a 4.5% year The total number of customers using mobile on year increase in the number of connections, services grew by 1.4 % and reached 6.94 mil- The youngest operator entered the Slovak telecommunications market in 2015, registering nearly 236,000 customers, reaching thus achieving a penetration of fixed Internet lion of active customers, representing an in- a market share of 3 %.
of 71% in Slovakia. In this segment, Orange crease of almost 93,000 customers. Source: Data published by operators
28 29 Orange Slovensko in the 4Telecommunications Market
Innovation moves us further and improves the lives of our customers 2017 Chapter IV Annual Report
In 2017, Orange again continued Having Services for the Whole into three price levels, Premium, Optimal, and to fulfil its promise to provide customers Family from One Operator in One Basic, which vary in the speed of the Inter- Package Pays Off net and digital TV. Depending on the availa- with useful and relevant services bility of the technology at the selected ad- that make their lives easier Strategic news of the past year - the Love ser- dress, they provide customers with optical vice package brought the latest trends not solutions or fixed LTE connections in the 4G only to Orange, but also to Slovakia, main- network. Together with the service package, ly in the sector that characterizes joining the the customers also get many other benefits mobile and fixed services. The transition to that make communication and fun within the Last year, we also focused on bringing our cus- representing a 15% year-on-year increase, pre-combined offers has allowed technolog- family more enjoyable and add value to them. tomers and their families the best user experi- were those customers who transferred their ical development, especially in the area of A financial subsidy worth more than 500 EUR, ence and the most of benefits from the servic- number from another operator. The number high-speed fixed internet connection. Love which customers receive with the Love Pack- es offered. We have brought them products of mobile data customers grew by 3% to 1.39 packages are a unique offer in Slovakia. They age, can be used not only to buy a mobile and services that they can easily and comforta- million customers and the number of fixed-line include a voice plan with limitless calls in Slo- phone but also other smart devices, a game bly use. The products which can facilitate their customers increased by 9% to 176,000. vakia and across the EU, fixed internet and console, a TV, a PC, or a tablet. Although it everyday lives. We want our customers to fo- modern digital television. They are divided is an offer where a customer has to decide cus on what matters the most to their lives and In addition to an increase in the number of cus- to enjoy sharing the time with their loved ones tomers of data services, Orange has also re- and families. The fact that amongst all the oper- corded an increase in the combined custom- ators in 2017, the most, over 607,000 customers er base, that is, customers who use at least The number of customers in Orange Slovensko decided to sign a contract with Orange, is evi- one additional service in addition to the voice Year 2015 2016 2017 dence that our strategic direction is correct. plan. Their number increased year-on-year by Mobile Service Customers 2,896,496 2,882,606 2,834,436 1.2% to 345,000. In particular, convergent of- Fixed-line and digital TV including LiteTV customers 200,657 189,244 192,854 At the end of the year, Orange recorded 2,834 fers contribute to the growth of the combined Total of 3,097,153 3,071,850 3,027,290 million active mobile customers and 193,000 base. Therefore, introducing the Love package The number of mobile service customers declined by 53,000 in 2017. This decline was mainly due to a decrease in the number of fixed-line customers, including 67,000 digi- with pre-combined mobile and fixed services prepaid service customers. Their number decreased by 43,000 to 451,000. tal TV customers. Of which more than 53,000, was one of Orange's key activities last year. Source: Internal Data from Orange
32 33 2017 Chapter IV Annual Report
at one point to buy all three services for the adapted in areas where Orange is not covered Last year, the new optics television was also were smartphones. For customers who most- household, namely mobile, fixed internet and by optical internet. Wide availability, along with re-introduced. Its availability is determined by ly use the benefits of the online world on their TV, for the first three months of its launch we simple installation, made the 4G Internet for the availability of optics, which is constantly smartphones, spend time on social networks, have already registered the first 2,000 custom- Home a great choice for customers who are expanding. The optics from Orange bring digi- stream online videos, listen to music, or play ers at the end of the year. not within the reach of optics and are looking tal television with top-notch screens, dozens of e games, Orange brought even more attrac- for Internet with features similar to or better TV stations and a host of useful features that tive data plans, and as the first one, Orange An integral part of convertible offers are fixed than DSL connections. enhance the comfort of watching TV. In the bringing Go data introduced the opportunity to services, but customers can choose to buy past year, there were 5,000 TV viewers extra transfer their unused data to the next month. them separately, not just as a package. In or- The development of fixed-line for the optics and their total number reached der to better navigate within the provision of customers of Orange Slovensko 50,000, 8.7% more than in 2016. fixed services for the households, Orange has Review of the number of mobile data 2017 made it easier for customers, in the past year, 2016 The Customers Can Stay Online service customers to find the most suitable services for their fam- 2015 Everywhere Thanks to a Quality 2016 2017 ily - only on the basis of their price preference. Network 2015 The Home Offer includes both optical and mo- bile 4G internet connectivity at three price lev- We live in a digital age that brings unprece- els as well as three new levels of TV services. dented customer demand for connectivity, fast and high-quality Internet connectivity and ser- Orange Has Long Been More vices. people have fun, work and call more or Than Just a Mobile Operator send more text messages over the internet. Customers want to be always and everywhere Fixed service offers are being used by more online. It is allowed to them by a quality net- and more customers. The quality, stability and 152,156 161,422 176,343 work and a rich offer of high-end devices, as 1,260,000 1,350,000 1,390,000 performance of the fixed Internet was appre- well as by a range of data services. Mobile The number of fixed-line customers increased by 15,000, with ciated by 22,500 new customers last year. the increase being mainly attracted to the new 4G Internet Internet is used by 85% of smartphone cus- More and more customers are interested in mobile data novelty. That has been chosen by 17,500 customers as their services of the largest and fastest mobile network from Orange. Of these, nearly 80% opted for a 4G Internet internet connection to their home. tomers, while smartphone usage is growing. Their number increased year-on-year by 40,000.
for Home, a novelty that has been very well Source: Internal Data from Orange In the past year, up to 89% of all phones sold Source: Internal Data from Orange
34 35 2017 Chapter IV Annual Report
Increased customer demand for data is also Therefore, of the total volume of investments 583,828 customers were using the Together Prima Kids card, especially for children and confirmed by data traffic that is steadily grow- of almost 96 million EUR, more than 69 million for Free Service, creating 146,665 groups. The their parents, last year. With Prima Kids, chil- ing. Compared to 2016, Orange custom- EUR Orange spent on networks. Orange ex- average number of members in one group is dren are always able to call their parents, even ers transferred by 32% more data in the mo- panded the availability of fast mobile internet four, the average number of minutes called is if they have no credit left. In addition, with Pri- bile data network, with almost half of the total in the 4G to 90% of the population network in 359.8, and the average number of SMS mes- ma Kids's ESET® Parental Control Service, volume of 20.2 million GB data has been trans- 2017. At the end of the year, the coverage of sages sent is 95.5. The most active group per parents have an overview of what their child ferred in the 4G network. This volume of data Orange's high-speed mobile Internet, 3G and month called for 15,089 minutes and sent up to does not only in the real world, but also in the transferred in the 4G network represents a 4G networks together, exceeded 98% of the 14,603 messages. virtual one. 1.5-time year-on-year increase in data traffic. population. In addition to the expansion of the LTE network, Orange has massively expand- We realize that the age of our customers is The evidence that we have exactly hit the needs Development of data traffic on the ed its optical network. That was expanded to constantly decreasing and that children get of parents is also documented by the success mobile network 11 new cities and more than 21,000 house- their first mobile at younger age. Up to 70% of this novelty when 5,000 customers chose 2017 holds in Slovakia over the past year. of children aged 5-15 years already have their for Prima Kids within 4 months from its launch. own phone. In order to become a real helper In addition, we also received the ESET award 2016 Mobile Operator for Families in the hands of our youngest customers, we for The Best Marketing & Business Co-opera- introduced the special profile of the prepaid tion for 2017. 2015 Orange with its services is present in half of Slovak households and in 37% of them is an ex- clusive operator. As a family operator, we also provide our customers with services that en- able advantageous communication across the whole family. We have improved the long-last- ing popular Together for Free Service for fam- 12,496,988,658 15,632,057,375 20,689,510,134 ily members to call each other free of charge, MB MB MB by expansion of the group to 8 members last Over the past year, up to 48% of all transferred mobile data was transferred to the 4G network at Orange. year, and we also allowed our customers to
Source: Internal Data from Orange join up to two groups. At the end of the year,
36 37 2017 Chapter IV Annual Report
In Europe as at Home times and voice traffic has increased by almost to decide whether they prefer to communicate packages. The most used and the most popu- 200%. Increased traffic, this however, naturally in roaming at regulated prices in the EU, or to lar package is the Max Roaming, however the The European roaming regulation, which came generates significantly increased costs, as the choose one of the newly developed travel pack- packages that are designed to communicate into force in June last year, has significantly roaming charges have not been cancelled for ages that can make their communication even outside of the EU are more and more popular. changed the behaviour of customers across operators. more advantageous. In addition to the favoured The Orange customers use their mobile phone borders. The cancellation of roaming charges price of communications in the EU, we have of- mostly in the Czech Republic, Austria and Ger- in the EU is a clear benefit for customers trav- All the plans and prepaid cards in the offer have fered travellers packages with other benefits, many, outside the EU - in Switzerland, USA, eling abroad. As expected, we have seen in- been adjusted according to the roaming regu- such as family-based travel insurance or more Turkey and the United Arab Emirates. On the creased interest in the use of roaming servic- lation. The customers in EU countries, Norway, advantageous communication, in more than 80 other hand, foreign users from EU countries es and thus the associated multiple increase Liechtenstein and Iceland communicate at their countries around the world. using our network, are from the Czech Repub- in traffic. After the first months of the Europe- home prices, and they use the prepaid plan or lic, Austria, Germany, Poland, the United King- an roaming regulation, the data traffic of our credit to communicate in these countries. In ad- Over 30,000 customers have decided for con- dom and from non-EU countries, as Switzer- customers has increased more than seven dition, however, we have given them the chance venient communication with new roaming land, the USA, Israel, Turkey, Russia and China.
38 39 Customer 5Care The higher we go, the better services we bring to the people 2017 Chapter V Annual Report
Taking Care of the Customers and Providing Them with Top Support
Keeping the highest standards in commu- in person at the points of sale or via the con- 5%, by which we succeeded to exceed the of our communication with our social network- nication and maximum support for our cus- stantly available Customer Line 905, they have world benchmark for overall satisfaction. This ing customers. tomers is the reason why we are constant- the opportunity to use online consulting on Or- change is based on the model of daily cus- ly working on our procedures, supporting ange's facebook profile, quickly arrange things tomer response tracking and active responses and educating employees in direct con- in the Internet Customer Zone, or using the ad- from our side. tact with the customer and also, bringing visor Expert Line. new solutions and opportunities for mutual The constant boom of digital technologies, is satisfaction. Through all of our communi- In 2017, Customer Line 905 received near- obviously also reflected in the communication cation channels, we want to offer the cus- ly 1,134 million calls. Compared to the previ- with the customer, which is becoming more tomer the most effective way to get expert ous year, we again managed to slightly reduce and more intense. Last year, the customer care advice or assistance with the setting up of the number of customer calls. There are few section solved approximately 48,000 custom- services and facilities, solving any difficul- reasons for th taff, or an increasing number of er emails, most of which were resolved in less ties in using the service, we also want to customers who use electronic channels to ar- than 24 hours. At the same time, we respond- respond with flexibility to questions from range their requirements. In order to be able ed to our customers to almost 18,000 inputs customers. to adjust our customers care to their expec- through our facebook profile, where the aver- tations, we have implemented a new Staffino age response lasted less than 3 hours. And Fast and Quality Service solution in the first half of 2017, to measure total in 2017, we have also launched a new digital through Each Channel customer satisfaction with our customer ser- channel - customer care chat. We answered vice. Already in the second half of the year, we more than 48,000 chat questions. We are glad Customers can get the support they need have succeeded in increasing our overall sat- that we again managed to defend the Socially through a wide range of our channels - whether isfaction with customer service by more than Devoted title, which confirms the high quality
42 43 Employees
With a common vision, we are fast approaching 6our goals 2017 Chapter VI Annual Report
We Care for Employees
“To be a digital and caring employer and thus devices of the employees - Plazza brings high highest quality in human resource manage- environment for every employee without differ- create conditions for our employees that are in document availability practically from anywhere. ment. Last year we also confirmed that, at Eu- ence. That is why we are all the more delight- line with their everyday needs and lives.” This is The Plazza network is actively used by approxi- ropean and world level. For the fifth time, we ed to have received the International European the long-term goal of Orange in the human re- mately 80% of Orange employees. have defended the title of Top Employer of Slo- Gender Equality Certificate (GEE @ IS). Orange sources area. In order to support this commit- vakia, this term with the best results being con- has thus also become part of the Orange initia- ment, we have set three priorities - to ensure the Education firmed in training employee development, and tive called "GEE & IS Audit - The Gender Equal- right skills for tomorrow, to develop flexible work- the corporate culture setting. We also suc- ity European and International Standard." The ing methods and to promote employee engage- Continuous improvement in the workplace ceeded in regaining the Top Employer Europe aim of this audit was to verify whether we are ment – these are not just a commitment towards is now a necessity for employees, but also Award. Together with colleagues from other an employer contributing to a culture promot- employees, but they are filled with real-world ac- a great asset Therefore, during the year, we European countries where Orange has been ing equality and diversity from an age and gen- tivities such as human resources management bring a wide range of development and educa- operating, we have defended this European ti- der point of view. Audit assessed equality in as well as corporate social responsibility. tional activities that contribute to complement- tle together for the sixth time. And thanks to the areas of wage policy, career opportunities, ing and expanding the knowledge and skills of colleagues from other Orange divisions, we education, work-life balance and other initia- Staying Flexible in the Digital the employees. Investing in support for em- have also been certified as 2018Top Employ- tives that promote fair treatment with all groups Environment ployees' development activities is not an insig- er Global. of employees. nificant item, we are, however, aware of the fact More flexible communication and access to in- that this is an excellent investment. In 2017, we Politics of variety Care for health and quality human formation brings the digitization of various in- invested 694,000 EUR in training and educa- resources management ternal documents, but especially the establish- tion, and the staff completed a total of 53,580 Within Orange, we consider equality of gen- ment of Plazza – the corporate social network. It training sessions. der opportunities as an increasingly discussed For the past three years, Orange has had enables flexible and efficient colleague commu- topic, to be an important area that we pay at- a healthier program for employees. Within that nication, document sharing and editing in one Quality Human Management tention to and focus on, through concrete ac- program we focus on activities that promote place, and with the intranet being accessible tivities and access to our employees. We cre- health, healthier lifestyle and leisure time for also from outside the company - from mobile In the long-term, we are able to retain the ate an attractive, fair and motivating work our employees. Thanks to this program, we can
46 47 2017 Chapter VI Annual Report
be proud of the first place among the non-pro- of all our human resources management activ- duction companies in the Healthy Company ities is to continuously increase the number of Competition for 2017. employees who are positive about the compa- ny, are satisfied with it and also, associate their Benefits future with it.
In addition to all these activities, of course, we We have enriched our portfolio of benefits with Employee placement continue to provide and complete the wide psychological counselling this year. Several range of benefits our employees have at their lectures on mental health were held during the Bratislava (60%) disposal. The beneficial and social policy has year, but employees also have the opportunity long been highly appreciated by employees in to use individual psychologist visits. Banská Bystrica (33%) Orange, which really makes us happy. The goal Košice (2%)
Ivanka pri Dunaji (3%)
Nitra (1%)
Prievidza (1%)
In 2017, Orange Slovensko employed an average of 1,120 employees within the company's branches located in Bratislava (60%), Banská Bystrica (33%), Košice (2%), Ivanka pri Dunaji (3%), Nitra (1%) and in Prievidza (1%).
48 49 Responsible 7Business We feel the need to protect what we care about and, to develop what is beautiful 2017 Chapter VII Annual Report
Corporate Social Responsibility at Orange
Orange, as the complete provider of telecom- company, it is our feedback on the processes The policies are implemented in our organi- the people entering into the premises of the munications services and a leader in the tele- and activities we are conducting in this area. It zation by introduction and constant improve- company. That is why we introduced new rules communications market, is applying the prin- shows how to go further, what to change and ment of a quality management system, envi- on health and safety, also fire protection for ciples of corporate social responsibility to how to continue. Regular evaluation enables us ronmental management system and the health visitors and suppliers of works and services customers, employees, partners and commu- to monitor the functionability and compliance and safety management system in accordance at the end of 2016. The goal of the new rules nities. Corporate social responsibility is one of with business principles in practice in Orange. with the international standards ISO 9001, ISO is to ensure active suppliers' access to com- Orange´s strategic pillars. It strikes a balance For each of them, we have a defined frame- 14001 and OHSAS 18001 with the active par- pliance with OSH, also to ensure the safety of between the needs of partners, the company, work of indicators, indicators that have been ticipation of all employees. visitors, thus ensuring maximum safety at our its customers, shareholders and employees, developed in accordance with our Best Prac- workplaces. and the flexible implementation of changes tice Guidelines as well with as our experience. Orange has implemented and certified the that support the long-term sustainability of our In cooperation with the Orange Group, we OHSAS 18001 Safety and Occupational Health Considerate Approach to business. At Orange, we are convinced that have successfully implemented a comprehen- and Safety Management System (since 2011. Environment the only a way of doing business that balanc- sive software tool - INDICIA, which enables us The established system enables us to identify es business objectives of the company and its to efficiently set, control and evaluate the es- and assess the risks of OSH in our workplac- Almost every business entity has an impact on impact on society, is sustainability. At the same tablished social responsibility indicators. The es, to manage them for elimination, to improve the environment - whether direct or indirect. It time, this business strategy declares respect gathering of environmental indicators is carried performance and to achieve compliance with is essential to take this fact completely across for society, the environment and morals. out quarterly and the gathering of social indi- legal OSH requirements. All with one goal - to the company and find as many opportunities cators once a year. achieve maximum safety and health at work as possible to eliminate this. It is quite obvious Orange as a Trustworthy for each of us. One of the necessary areas of that, in the interest of sustainable business, Company and a Business Partner The basic document, our guide in Orange in the OSH management system is also the in- we carry out systematic changes and projects developing business activities in the field of volvement of our suppliers in the OSH security that reduce the consumption of energy. Of- The corporate social responsibility strategy of providing quality services and networks to our system, as we can not secure safe workplac- ten, these environmental projects also support Orange is contingent on the system of auditing customers, are the Quality Policy, Environment es if we do not secure the "safe conduct" of our ambitions in the field of digitization and the and reporting. This system is a mirror for the Policy, and Safety and Health Policy at Work. the suppliers. At the same time, we also care worthwhile use of new technologies by our em- about the security of the visitors and others, ployees or customers.
52 53 2017 Chapter VII Annual Report
In the past year, we have succeeded in achiev- of considerable significance. 2,466,229 docu- ones in Orange - our employees. The "green" re-collections. One of the most outstanding ac- ing more than a quarter of a million of our cus- ments were signed digitally in 2017. In August initiative By Bicykle to Work that has been reg- tivities in this area is the traditional competition tomers using plans taking advantage of the 2016, we even launched the B-Sign service - ularly joined by employees in Banská Bystrica in the collection of unneeded mobile phones, benefits of an electronic invoice. Their share tablet signing documents via the courier. This since its inception, has also been supported by which has been applied in Orange for the past of the customer base thus reached more than option is currently used by almost 20% of cus- Bratislava's colleagues in the past years. The six years. It combines an ecological, charita- 71%. In addition to customer benefits such tomers who choose to receive a home deliv- goal of the By Bicykle to Work Competition is ble and entertaining element in one useful pro- as comfortable and clear archiving or invoice ery. We save more than 500,000 pages of pa- to promote the building of cycling routes in Slo- ject. For each returned mobile, Orange spends searches, we reduce paper consumption and per annually thanks to B-Sign. vak towns and to motivate the company's em- 50 cents in the ongoing collection period for a support our environmental commitments. ployees to use the bicycle for traveling to and particular nonprofit organization. Thanks to this Electricity consumption is the largest indirect from work, but also to promote the reduction activity and the initiative of our customers, we We also use a new, modern technology solu- CO2 producer and Orange has committed to of exhaust gases in cities. In the year 2017, a have donated about 25,000 euros to non-prof- tion when concluding a contract or other doc- cutting its CO2 production by 20% by 2020. total of 63 Orange employees were involved it organizations. In the past year, we support- umentation that our customers can sign with To achieve this, we perform various activities in this activity. Within a month of this activity, ed the activity in the collaboration of the Tros- eSign, an electronic biometric signature. ESign - from automatic shutdown of computers af- they spent a total of 7,758.58 km and saved ka Rapper Duo and thanks to their concert tour, is capable of capturing all the data that guaran- ter working hours to optimization of technology 1,986.72 kg of CO2. we extended the idea of collecting unnecessary tees the uniqueness of the signer and the secu- spaces. In addition, we also use online power mobiles to another target group. rity of the entire process from the hand-signed network to monitor the energy parameters of „Green“ to an Ecological signature on the electronic pad. The benefits individual devices. Effective solutions are also Approach at Orange At the company's premises, we have dispos- of this solution are also a significant reduction applied to the operation of our networks - the al containers for separate collection, however, in the cost of scanning, processing and archiv- base stations that use solar energy are gradu- In total, we collected 51,461 mobile phones in without our environmentally friendly staff that ing of documentation, postal costs, and so on. ally being built up. We currently have 36 such 2017, representing 15.3% of the total number of would be useless. Since 2007, we have been Signatures are sent to the customer via email, stations in Slovakia, and we plan to continue mobile phones brought to the Slovak market. conducting a separate collection of paper and and the advantage of this technology is also to increase them. Overal, we managed to save What does this number mean for us? We have plastic bottles in our own retail shops, office an acceleration of dealing with requirements at 3,324 MW of electricity in 2017. managed to prevent about 5.2 tonnes of electri- buildings and archive buildings. In 2017, we any branch. The solution thus provides great- cal and electronic waste from being disposed of separated 67,927 tonnes of paper, which get er comfort and faster customer service, as well In addition to technological measures to save in communal waste. Last year we also collect- another chance to be recycled and 2.1 tonnes as greater security. Ecological benefits are also the environment, we dispose of the human ed about 1 ton of batteries from cell phones in of plastic bottles.
54 55 2017 Chapter VII Annual Report
Thanks to all these activities and the overall Ethics clearly states that no corruption is toler- comply with all applicable laws in the Slovak We Educate and Support approach to the environment and the level of ated in Orange. The "Fraud Prevention and An- Republic, the EU and international standards the Digital Development environmental behaviour, we have excelled in ti-Fraud Policy" procedure highlights the zero on ethical and accountable behaviour, and in of Our Customers our audit last year. The Responsible Compa- fraud tolerance of our company and contains particular with those regulations relating to hu- ny project commission has evaluated our over- a section dealing with corruption. Following the man rights, environmental protection, sustaina- Technology is already a matter of course in all environmental philosophy and awarded Or- Orange Code of Ethics, the Anti-Corruption Poli- ble development, bribery and corruption. people's lives, and in the context of our busi- ange an enhanced level certificate. cy was approved in 2012 in our company. ness, we welcome this trend as well. Howev- Orange is a member of The Advertising Stand- er, we care that our customers use them wise- Ethics in Business We also pay close attention to the ethics of our ards Council and, in the context of communi- ly and responsibly. We consider it fair to talk partners businesses. We prefer partners certi- cation, marketing and sales approaches, ap- openly about the risks that digital time brings, Ethical principles are not just a set of theoretical fied according to their area of activity. Our pri- plies ethical rules and a responsible attitude to and on the other hand, to offer effective solu- rules outlined in the Code of Ethics. Employees ority is given to their complying with the rules the content creation. tions to eliminate them. are regularly required to undergo training and and standards in force in the European Union. e-learning courses in ethics, which, on the basis Their business shall be ethical and performed of practice, encourages their thinking and con- in compliance with the applicable laws of the duct within the bounds of moral and ethical code Slovak Republic. In addition, we also carry out declared by Orange's ethical rules. Even new expanded evaluations of selected suppliers fo- employees are obliged to become acquainted cusing on the safety and environmental impacts with the Code of Ethics and to undertake Ethical of their business activities, as well as on some e-learning immediately after their employment. aspects of the business that are perceived by In case an employee wishes to draw attention the global community (e.g. child labour abuse). to a breach of ethics, he or she may, in addition The Supplier's Code of Conduct applies to all to standard contacts, such as a superior or eth- procurement activities managed by Orange. ical adviser, get in contact anonymously direct- We expect our suppliers to comply with and ly with the Orange parent company by letter or enforce these fundamental principles in their email in an anonymous, so called, whistle blow- entire area of competence in accordance with ing mechanism. At the same time, the Code of the Annex to the Contract providing that they
56 57 2017 Chapter VII Annual Report
As the first telecom operator ever, we launched context of our business to help them in practi- pilot project in three places in 2017 to eliminate We Support the Active Ones a campaign to raise awareness of the risks of cal life. In the past year, we have launched such customers' fear of using new technologies, to using mobile phones and the internet among a product under the name of Prima Kids - the show them how to use their phone efficient- Orange perceives its surroundings also from children. It was in 2006 when we conducted first prepaid card with which children can call ly and make effective use of it, and to support another perspective, it is interested and en- the first survey. This brought alarming findings. their parents, even when they run out of cred- their technological and digital literacy, which is gages where it can be helpful - not only finan- We have been monitoring the situation regular- it. Prima Kids service also includes ESET® Pa- essential nowadays. In autumn, we organized cially. Through the Orange Foundation, Orange ly and responding to current issues since then. rental Control, which protects the child from the Prima Kids Roadshow in eight Slovak cit- supports useful ideas for active people who We work with professionals to provide free inappropriate Internet use and mobile applica- ies, where experts, psychologists and mobile help improve the lives of others. workshops, and information and education ac- tions. Parents will get a complete overview of phone experts were available to customers at tivities to help parents, teachers and children what the children use their mobile phones for, Orange's points of sale, who advised visitors In 2017, we also helped in the form of mobile find ways to take advantage of communication what apps and files they download, how much how parents should lead their children to the financial collections. Whether with our long- technologies while protecting children from time they spend on the internet, and what pag- safe use of existing technologies. time partners, Friends for Children of Unicef, the risks of the online world. In 2017, 240 inter- es they visit. To prevent the child from getting active lectures were delivered in primary and inappropriate content, parents may block ac- secondary school to pupils from all over Slova- cess to certain categories of sites or to specific kia (4,592 pupils), teachers, parents and NGOs sites. A useful feature is also setting a limit for working with children. We have helped educate playing games, which may vary during school over 35,000 pupils, teachers and parents. and free days. In addition, the parent can find the location of the child thanks to the GPS po- Our website www.detinanete.sk is the platform sition, for example, while returning home from for access to information, expert advice, playful school. It is a really a practical tool for parents tests or inspiration and the tips of a child psy- to keep control of their childrens´ safety online chologist. In particular, parents have emerged and offline. as the risk group in recent years. We target this group and help them overcome the digital gap We have moved the development of digital lit- between them and their children. In addition eracy of our customers as well as of the Slo- to education, we also look for products in the vak public to our sales outlets. We launched a
58 59 2017 Chapter VII Annual Report
Magna and Good Angel, or through the DMS of communication technologies by children at for their extraordinary contributions. Together, needed. Again, we joined forces with the Na- system, and one-time contributions from do- elementary and secondary schools. In the pop- eleven such organizations received an award, tional Transfusion Station and 122 of our em- nors in the collections. We jointly carried out ular Donate Christmas Program, it distributes given annually in the field of education, com- ployees donated more than 50 litres of blood in 18 collections in 2017. In total, there were more up to 65,000 EUR to support 357 applications munity development and social inclusion. The the past year. 31 other colleagues spent their than 800,000 EUR collected through mobile fi- for people in need. independent evaluation commission rewarded time to a make good a job of their projects sup- nancial collections. This money always goes to the organizations, not only morally but also fi- ported through the Employee Grant Program. help in full. In 2017, the foundation again continued with nancially. The Foundation distributed financial Thanks to that program, they got assistance educational activities in the Lab powered by support of 59,000 EUR among these organisa- to enhance the environment, help children, The Orange Foundation the Orange Foundation. The interest of peo- tions. The Special Prize for Personality for Civ- save sites and perform many other activities. ple in using the workshop and the machines, is ic Engagement and The Prize of the Public had Through collections of clothing, employees The Orange Foundation has always strived to great. Different educational activities such as been also awarded to the winner decided by donated more than 500 kg of clothing in 2017. make the world a better place for everyone. Makers of Slovakia, stuDIYo, Meet and Code, public vote. By such donations we supported 4 non-profit Therefore, it systematically focuses its support KID or various workshops not only for schools organizations and a crisis centre to look after on education, community development and were held there. The Lab which currently has Support from Orange Employees people in need. Every year, we join the biggest support for deficient groups. In addition to grant 50 active members, organized more than 80 corporate volunteer event in Central Europe - support, the foundation develops long-term workshops over the past year and had also Collections of clothing, donation of blood, Our City. We enabled the active participation partnerships with non-governmental organiza- been involved in projects such as Research- own projects and ideas - these are the ways in of our employees in this program during their tions, helps them to fulfil their mission and as- ers´ Night, White Night, Good Market and Ur- which employees in Orange try to help where working hours in the past year. sists where necessary. The foundation redis- ban Market. tributed more than 630,000 EUR and supported 536 publicly beneficial projects in the past year. We Support Those Who Change It has implemented grant programs to support Slovakia into a Better Place useful ideas that help community development, volunteering, and seeking common solutions to In 2017, the Orange Foundation Award was local or social problems. Under the E-School awarded for the eighth time, a unique award for Future Program, the foundation supported of its kind in Slovakia. Its goal is to appreciate projects aimed at the responsible and safe use the work of non-governmental organizations
60 61 2017 Chapter VII Annual Report
Orange is a founding member of the Business an accelerator of experience with music, a fan The 9th Orange Mini-hockey Tour was held in Summer Hockey School of Marián Gáborík. Leaders Forum, which brings together leaders of Slovak hockey, with an emphasis on support 2017, a favourite event to promote the develop- They emerged from regional matches where in promoting the principles of responsible busi- for children and youth talents. ment of young ice hockey talents. Orange, as 688 hockey talents from 34 teams from all over ness in Slovakia. It is important for us to sup- the general partner of this event, perceives the Slovakia met last year. port the engagement of companies and spread Thanks to our partnerships with the largest tournament as the opportunity to gain experi- the ideas of responsible business. That is why Slovakian Pohoda and Grape Festivals, we ence for small ice hockey players, but also as Last year, Orange again supported individu- we again, became the main partner of the VIA brought useful facilities to their venues to pro- a space for real sporting emotions and hock- al athletes, the Slovak Volleyball Federation, BONA SLOVAKIA Award in 2017, awarded to vide the participants and organizers with max- ey joy shared among the coaches, teammates, Wildwater Canoeing, The Slovak Paralympic small and large companies for their responsi- imum comfort using technology security, qual- family or fans. It is a project that Orange has Committee, the Slovak representation at the ble business and corporate philanthropy. ity coverage, service and a full entertainment supported since it came to life. In its ninth term, World Hockey World Championship in Co- and practical service area. That is why we suc- six winners of regional tournaments fought for logne and several projects and organizations in More detailed information about Orange's ceeded in creating record numbers in 2017 the winning trophy and participation in the hockey, the strongest sports field for Orange. responsible business and the activities when compared to the previous year, the vol- of the Orange Foundation are available at ume of transferred data grew by 22%, while www.orange.sk and www.nadaciaorange.sk. the data transfer in the 4G network increased by 124%. Similarly, the numbers went up well Orange and Its Connection with in the use of the Pohoda 2017 powered by Emotions in Music and Sport Orange, a useful festival application that was downloaded and actively used by more than In the field of sponsorship, the priority of 2017 18,600 people. was to link the Orange brand with the emo- tions and passion of fans of music and sport. In the past year, Orange has again launched an Thanks to the technologies and services of exclusive co-operation with Spievankovo, the Orange, which we naturally use to create max- childrens music project. As the main partner, it imum comfort for our customers but also for wanted to allow customers to spend time with music and sports fans, we continued this ap- their loved ones and to make specifically the proach in the past year. In this area, Orange is youngest family members happy.
62 63 Financial 8Statement It is time for us to look at how we succeeded in 2017 2017 Chapter VIII Annual Report
Table of Contents
Independent Auditor´s Report...... 68
Separate Statement of Financial Position...... 70
Separate Statement of Comprehensive Income...... 72
Separate Statement of Changes in Equity...... 73
Separate Statement of Cash Flows...... 74
Notes to the Separate Financial Statements...... 76
Orange Slovensko, a.s.
Independent Auditor’s Report and Separate Financial Statemnts (prepared in accordance with International Financial Reporting Standards as adopted by the EU)
Year ended 31 December 2017
Company identification number: 35 69 72 70 Tax identification number: SK2020310578
66 67 2017 Chapter VIII Annual Report
Independent Auditor’s Report
68 69 2017 Chapter VIII Annual Report
Separate Statement of Financial Position as at 31 December 2017
In thousands of EUR Note 31 December 2017 31 December 2016 In thousands of EUR Note 31 December 2017 31 December 2016
Assets Equity and liabilities
Non-current assets Equity 12
Property, plant and equipment 4 355,783 342,830 Share capital 39,222 39,222 Intangible assets 5 146,980 162,243 Reserves 15,260 15,260 Investments in unconsolidated subsidiaries 6 306 106 Retained earnings 137,663 128,896 Non-current receivables 9 11,624 8,869 Profit for the year 92,221 81,700 Other non-current assets 32 31 284,366 265,078 514,725 514,079 Non-current liabilities Current assets Provisions 14 26,751 28,626 Inventories 8 19,136 15,691 Long-term debt/loan 13 210,000 210,000 Trade and other receivables 9 89,790 65,715 Deferred tax liabilities 7 7,362 5,689 Other assets 4,266 4,293 Non-current payables 14 15,441 17,050 Current financial assets 10 29,713 21,834 259,554 261,365 Current income tax receivable – 3,347 Cash and cash equivalents 11 8,820 6,090 Current liabilities 151,725 116,970 Current income tax payable 10 4,102 – Total assets 666,450 631,049 Trade payables and other liabilities 15 97,793 83,721 Provisions 14 1 1 Deferred income 16 20,634 20,884 122,530 104,606
Total equity and liabilities 666,450 631,049
70 71 2017 Chapter VIII Annual Report
Separate Statement of Comprehensive Income Separate Statement of Changes in Equity for the Year Ended 31 December 2017 for the Year Ended 31 December 2017
In thousands of EUR Note 2017 2016 In thousands of EUR Note Share capital Reserves Retained earnings Total
Revenues 17 554,683 551,898 Balance as at 1 January 2016 39,222 15,260 243,814 298,296
External purchases 18 (306,703) (293,464) Total comprehensive income for the year Other operating expenses 19 (18,473) (16,174) Profit for the year – – 81,700 81,700 Other operating income 19 38,986 14,926 Share based plan 82 82 Wages and contributions 20 (45,716) (46,354) Amortisation and depreciation expenses (95,175) (97,622) Transactions with shareholders Operating profit 127,602 113,210 Dividends paid – – (115,000) (115,000) Balance as at 31 December 2016 39,222 15,260 210,596 265,078 Interest income 101 73 Interest expenses (2,449) (2,162) Balance as at 1 January 2017 39,222 15,260 210,596 265,078 Other finance expenses (13) (174) Other finance income 216 26 Total comprehensive income for the year Profit before tax 125,457 110,973 Profit for the year – – 92,221 92,221 Income tax 21 (33,236) (29,273) Share based plan – – 67 67 Profit for the year 92,221 81,700 Transactions with shareholders Other comprehensive income – – Dividends paid – – (73,000) (73,000) Total comprehensive income for the year 92,221 81,700 Balance as at 31 December 2017 39,222 15,260 229,884 284,366 Total comprehensive income attributable to: Owners of the Company 92,221 81,700
72 73 2017 Chapter VIII Annual Report
Separate Statement of Cash Flow for the Year Ended 31 December 2017
In thousands of EUR Note 2017 2016 In thousands of EUR Note 2017 2016
Profit for the year 92,221 81,700 Investing Activity
Taxes 21 33,236 29,273 Purchase of property, plant and equipment and intangible assets 4,5 (93,038) (84,203) Dividend income (250) – Acquisition of subsidiary (200) – Interest expenses 2,449 2,163 Proceeds from sale of non-current assets 7,666 8,523 Interest income (101) (72) (Increase) in financial assets (7,880) (21,834) Depreciation and amortisation of tangible and intangible assets 4,5 95,174 97,621 Net cash outflow from investing activities (93,452) (97,514) (Decrease) in provisions 14 (2,306) (1,260) Increase/(Decrease) in value adjustment to receivables 9 1,379 (8,445) Financing Activity Increase/(Decrease) in value adjustment to inventories 8 197 (16) Gain on sale of property, plant and equipment 19 (7,494) (8,322) Changes in current financial liabilities 10 – (36,582) Share based compensation 66 83 Increase in long-term loan net of arrangement fees 13 – 100,000 Dividends paid 12 (73,000) (115,000) Profit from operating activities before changes in working capital 214,571 192,725 Net cash outflow from financing activities (73,000) (51,582) (Increase)/Decrease in trade and other receivables (28,213) (413) and other assets Net increase/(decrease) in cash and cash equivalents 2,730 581 (Increase)/Decrease in inventory 8 (3,642) 4,818 Increase/(Decrease) in trade liabilities and deferred income 15,16 11,652 (18,740) Cash and cash equivalents at the beginning of the year 11 6,090 5,509
Cash generated from operations 194,368 178,390 Cash and cash equivalents at the end of the year 11 8,820 6,090 Interest received 2 3 Interest paid (1,325) (1,193) Dividends received 250 – Taxes paid (24,113) (27,523)
Cash flows from operating activities 169,182 149,677
74 75 2017 Chapter VIII Annual Report
Notes to the Separate Members of the Company’s Bodies
Financial Statements for the Year Body Function Name Chairman and Chief Executive Officer Pavol Lančarič Ended 31 December 2017 Member and ITN Director/CEO deputy Ivan Golian Member Zuzana Nemečková Board Member (since 12 July 2017) Vladislav Kupka of Directors Member (since 12 July 2017) Reza Samdjee Deputy Chairman (until 11 July 2017) Ladislav Rehák 1. General Information Member (until 11 July 2017) Antoine Guillaume Guilbaud Member (until 11 July 2017) Marc Ricau Member Christophe Naulleau Orange Slovensko, a.s. (hereinafter also re- establishment and operation of public mobile Member Maï de La Rochefordière ferred to as the “Company”) is a joint stock telecommunication networks at assigned fre- Member (since 12 July 2017) Ladislav Rehák Member (since 12 July 2017) Marc Ricau company established on 29 July 1996 and in- quencies as well as the operation of fibre-optic Supervisory Member (since 12 July 2017) Marián Luptovský Board corporated on 3 September 1996 with its reg- cable networks. The Company is not an unlim- Member Bruno Duthoit istered office at Metodova 8, 821 08 Bratislava, ited guarantor in any other entity. Member Ľuboš Dúbravec Member Francis Gelibter Slovak Republic. In August 2008, Atlas Servic- Member Štefan Hronček es Belgium, S.A. acquired all the shares held Approval of the 2016 by Wirefree Services Nederland B.V., which Financial Statements had been the major shareholder since No- vember 2005, when it acquired all the shares On 13 June 2017, the General Meeting approved Employees held by minority shareholders and became the Company’s 2016 financial statements (No- 31 December 2017 31 December 2016 the 100% shareholder of Orange Slovensko, tary Deed No. N 168/2017, Nz 20368/2017,
a.s. The Company’s principal activity is the NCR1s 20824/2017). Number of employees as at 1,122 1,113
Of which: managers 111 112 Average number of employees 1,120 1,099
76 77 2017 Chapter VIII Annual Report
2. Adoption of New (b) Standards, interpretations, annual periods beginning on or after 1 Janu- and amendments to the ary 2018) and Revised Standards existing standards and interpretations adopted by ■ Amendments to IAS 40 “Transfers of Invest- In the current year, International Accounting- ■ Annual improvements 2014-2016 cycle: the EU but not yet effective ment property” (effective for annual periods Standards Board (IASB) and the International- Amendments to IFRS 12 (effective for annual beginning on or after 1 January 2018) Financial Reporting Interpretations Committee periods beginning on or after 1 January 2017) – At the date of authorisation of these financial
(IFRIC) of the IASB have not issued any new or the amendments clarify that the disclosure re- statements, the following standards, revisions, ■ Amendments to IFRS 1 and IAS 28 Annu- revised standards or interpretations that could quirements of IFRS 12 apply to interests in en- and interpretations adopted by the EU had al improvements to IFRSs 2014-2016 Cycle – be relevant to the Company’s operations for ac- tities that are classified as held for sale, except been issued but were not yet effective: various standards (effective for annual periods counting periods beginning on 1 January 2017. for the summarised financial information beginning on or after 1 January 2018)
■ IFRS 9 “Financial Instruments” and subse- (a) Standards and ■ Amendments to IAS 7 Disclosure Initiative quent amendments (effective for annual peri- ■ IFRIC 22 “Foreign Currency Transactions and interpretations adopted by (effective for annual periods beginning on or ods beginning on or after 1 January 2018) advance consideration” (effective for annual pe- EU effective in 2017 but not after 1 January 2017) – entities are required to riods beginning on or after 1 January 2018) relevant to the Company’s explain changes in their liabilities arising from ■ IFRS 15 “Revenue from Contracts with Cus- operation financing activities tomers” (effective for annual periods beginning ■ IFRS 16 “Leases” (effective for annual peri- on or after 1 January 2018) ods beginning on or after 1 January 2019)
The following standards, amendments, and in- ■ Amendments to IAS 12 “Recognition of De-
terpretations adopted by the EU are mandato- ferred tax assets for unrealised losses” (effec- ■ Amendments to IFRS 2 “Classification and ■ IFRIC 23 “Uncertainity over Income Tax ry for accounting periods beginning on or af- tive for annual periods beginning on or after Measurement of Share-based Payment trans- treatments” (effective for annual periods be- ter 1 January 2017 but are not relevant to the 1 January 2017) – clarify the accounting for de- actions” (effective for annual periods beginning ginning on or after 1 January 2019) Company’s operation: ferred tax where an asset is measured at fair on or after 1 January 2018)
value and that fair value is below the asset’s ■ IFRS 17 “Insurance contracts” (effective for
tax base. ■ Applying IFRS 9 “Financial instruments” annual periods beginning on or after 1 Janu- with IFRS 4 “Insurance contracts” (effective for ary 2021)
78 79 2017 Chapter VIII Annual Report
■ Amendments to IFRS 10 “Consolidated Fi- IFRS 15 standard relates to revenue recogni- The Company estimated based on evaluations ■ leases with a lease term of 12 months or less nancial Statements” and IAS 28 “Investments tion and Orange decided to apply the stand- carried out on contract by contract basis that and containing no purchase options, and in Associates and Joint Ventures” - Sale or ard in 2018 adjusting the reported comparative the first application of IFRS 15 would increase
Contribution of Assets between an Investor and periods, which means the restatement of 2016 the net equity as of January 1, 2017 by approx- ■ leases where the underlying asset has a low its Associate or Joint Venture (effective for an- and 2017 reported comparative periods. imately 48 million euros. IFRS 16 supersedes value (‘small-ticket’ leases). nual periods beginning on or after a date to be IAS 17 Leases and related interpretations. The determined) This standard would mainly impact the ac- Standard eliminates the current dual account- As a consequence, it will impact the presenta- counting for bundled offers which include ing model for lessees and instead requires tion of the income statement (depreciation and The Company anticipates that adopting most a handset component with a subsidised price companies to bring most leases on-balance interest expense instead of rental expense) and of these standards and amendments to the ex- and a communication service component: the sheet under a single model, eliminating the dis- the statement of cash flows (interest expense isting standards and interpretations will have cumulative revenue will not change but its allo- tinction between operating and finance leases. will only impact the operating cash flows where- no material impact on the Company’s financial cation between the handset sold and the com- as the debt repayment will affect the financing statements in the period of initial application, munication service will differ. The revenue split Under IFRS 16, a contract is, or contains, cash flows). In the statement of financial posi- except for the standards IFRS 9, IFRS 15 and between particular years will change due to a lease if it conveys the right to control the tion, the net equity will be reduced at the be- IFRS 16 where it is estimated those would af- acceleration of the device revenue recognition use of an identified asset for a period of time ginning of the arrangement (due to the accel- fect the Company’s future financial statements leading to recognition of a contract asset in the in exchange for consideration. For such con- eration of expenses attributable to the interest as detailed bellow: statement of financial position. Contract asset tracts, the new model requires a lessee to rec- component) and the intangible and tangible as- would be amortized against the communica- ognise a right-of-use asset and a lease liabil- sets as well as the lease liability will increase. IFRS 9 modifies the recognition of credit risk tion service revenue over the contract commit- ity. The right-of-use asset is depreciated and related to financial assets, moving from the in- ment period. the liability accrues interest. This will result in The future implication of the standard is cur- curred loss approach to an expected loss ap- a front-loaded pattern of expense for most rently being evaluated and will be applied in proach: this means that impairment will be rec- Commissions (i.e. payments to distributors di- leases, even when the lessee pays constant accordance with the requirements in 2019. ognized on trade receivables not yet due for rectly attributable to an obtaining a contract,) annual rentals. the telecom activities. The first application of will be recognized as an asset and will be am- this standard is expected to reduce the Com- ortized over the contract commitment period The new Standard introduces a number of limit- pany’s equity as of January 1, 2018. to which the payments relate. ed scope exceptions for lessees which include:
80 81 2017 Chapter VIII Annual Report
3. Significant Accounting Policies (c) Basis of Preparation (e) Property, Plant and Equipment
(a) Statement of Compliance 27.10 and not to present consolidated financial The financial statements are presented in eu- Owned Assets statements (with its 100% owned subsidiar- ros, rounded to the nearest thousand. They are Items of property, plant and equipment are The separate financial statements have been ies Orange CorpSec, spol. s r.o. and Orange prepared on the historical cost basis. The prin- stated at cost, less accumulated depreciation prepared in accordance with IFRS as adopted Finančné služby s.r.o.), which is also incorpo- cipal accounting policies are included in the and impairment losses, if applicable. Cost con- by the EU and on the going concern assump- rated into the Act on Accounting No. 431/2002 paragraphs below. sists of the price at which the asset was ac- tion. IFRS as adopted by the EU do not cur- Coll. on Accounting, as amended. These finan- quired plus the costs related to the acquisition rently differ from IFRS as issued by the IASB, cial statements are intended for general use (d) Foreign Currency (installation and commissioning, transport, as- except for certain standards and interpreta- and information; they are not intended for the sembling cost, etc). The cost of self-construct- tions that have not been endorsed by the EU purpose of any specific user or for the consid- Foreign Currency Transactions ed assets includes the cost of materials, di- as described above. eration of any specific transaction. According- Transactions denominated in foreign curren- rect labour, the initial estimate (where relevant) ly, users should not rely exclusively on these fi- cies are translated into euro using the ex- of the costs of dismantling and removing the (b) Legal Framework nancial statements when making decisions. change rate of the day prior to the transaction items and restoring the site on which they are for Preparing the date. Monetary assets and liabilities denomi- located, and an appropriate proportion of pro- Financial Statements Orange SA (France), the Company’s ultimate nated in foreign currencies are translated at the duction overheads. SIM cards are capitalized parent company and the ultimate controlling exchange rate valid on the balance sheet date. as an item of property, plant and equipment. These financial statements are the Company’s party, prepares consolidated financial state- The exchange rate differences upon transla- separate financial statements prepared un- ments in accordance with IFRS as adopted by tion are charged to the result for the period. Items of property, plant, and equipment are der Act on Accounting No. 431/2002 Coll. on the EU for a group of companies, which also Non-monetary assets and liabilities denomi- accounted for on a component-by-component Accounting, as amended. The financial state- includes Orange Slovensko a.s. and its subsid- nated in foreign currencies that are stated at basis at a level that allows for the depreciation ments were prepared for the reporting peri- iary Orange CorpSec, spol. s r.o. fair value are translated into euro at the foreign of each component over its expected useful od from 1 January 2017 to 31 December 2017 exchange rates valid on the dates on which the life and allows the proper accounting of asset in accordance with IFRS as adopted by the The consolidated financial statements of fair value is determined. disposal and withdrawal. EU. The Company elected to use the exemp- Orange SA are available at its registered office tion from consolidation in accordance with at 6 Place d’Alleray, 75015 Paris, France. the 7th Directive of the EU as well as with IAS
82 83 2017 Chapter VIII Annual Report
Subsequent Expenditure Depreciation (f) Intangible Assets The license fees and the spectrum fees are The Company recognises in the carrying Depreciation is charged to the income state- capitalized as intangible assets and amortized amount of an item of property, plant, and ment on a straight-line basis over the estimat- Intangible assets acquired separately by the over the license period. The administrative fees equipment the additional costs or cost of re- ed useful life of each category of an item of Company are stated at cost less accumulat- are expensed. placing part of such an item when that cost is property, plant, and equipment. Land is not ed amortisation and impairment losses if ap- incurred if it is probable that the future eco- depreciated. Depreciation starts when the as- plicable. Intangible assets mainly comprise Capitalisation of Spectrum Fees nomic benefits embodied with the item will sets are ready for their intended use. The esti- software and licences for operating the tele- Spectrum fees are the unavoidable payments flow to the Company and the cost of the item mated useful lives for the current and compar- communication network. computed on the principle of allocated band- can be measured reliably. All other costs are ative periods are as follows: width and fix tariff for the whole period to which recognised as an expense when incurred. Telecommunication licenses a license is granted. Payment is done on a quar- Upon the granting of the telecommunication li- terly basis during the whole license period. 2017 2016 censes (GSM, UMTS, LTE) Orange Slovensko,
Radio Access Network 5 to 28 years 5 to 28 years a.s. is obliged to pay to the Telecommunication The Company discounts the value of future Transmission 6 to 30 years 6 to 30 years Office one off license fee and two types of re- spectrum fees to their present value and rec- Switching 5 to 10 years 5 to 10 years current fees: ognizes them as other intangible assets. Relat- Data Network 4 to 5 years 4 to 5 years Dedicated Platforms 5 years 5 years ed future spectrum fees payables are present- Other Network 5 to 10 years 5 to 10 years ■ Administrative variable fees ed as both current and non-current liability. IT Non-Network Hardware & Infrastructure 2 to 5 years 2 to 5 years ■ Spectrum fixed fees Buildings 10 to 30 years 10 to 30 years Other Non-Network Equipment 2 to 10 years 2 to 10 years Local Loop 10 to 30 years 10 to 30 years SIM Cards 5 years 5 years
The useful lives of property, plant and equip- prospective basis. At the Company level, the ment are reassessed annually by Orange SA, revision of an individual asset’s useful life is which results in changes to the useful lives of performed when indicators of an earlier end of certain assets. These changes are recorded life exist. as changes in the accounting estimates on a
84 85 2017 Chapter VIII Annual Report
Subsequent Expenditures At the Company level, the revision of an indi- (h) Investments in Subsidiaries at fair value, subsequent to initial recognition Subsequent expenditures on capitalised intan- vidual asset’s useful life is performed when in- they are stated at their amortized costs using gible assets are capitalised only when they in- dicators of an earlier end of life exist. Investments in subsidiaries represent invest- the effective interest rate method, less provi- crease the future economic benefits embodied ments in 3 wholly-owned subsidiaries: Orange sions for any impairment of the receivables. in the specific assets to which they relate. All (g) Impairment of Assets CorpSec, spol. s r.o., Nadácia Orange (“the other expenditures are expensed as incurred. Foundation”), and Orange Finančné služby, Those receivables which include deferred pay- The carrying amounts of the Company’s assets s.r.o. – all three having the seat on Metodova 8, ment terms over 12 up to 24 months for the Amortisation are reviewed at each balance sheet date to de- 821 08 Bratislava. The Company’s investments benefit of customers who purchased handsets Intangible assets are amortised from the termine whether there is any indication of im- have been accounted for at acquisition costs. are discounted and classified as according to date they become available for use, using the pairment. If such indication exists, the asset’s their remaining maturities. A provision for im- straight-line method over the following estimat- recoverable amount is estimated. An impair- (i) Inventories pairment of trade receivables is established ed useful lives: ment loss is recognised whenever the carrying when there is objective evidence that the Com- amount of an asset or its cash-generating unit Inventories are stated at the lower of cost and the pany will not be able to collect all amounts due 2017 2016 exceeds its recoverable amount. Impairment net realisable value. The net realisable value is according to the original terms of the receiva-
Software 3 to 10 years 3 to 10 years losses are recognised in the income statement. the estimated selling price in the ordinary course bles (see Note 9). Licences 10 to 16 years 10 to 16 years of business, less the estimated costs necessary The recoverable amount of other assets is the for completing the sale and selling expenses. Contractual Penalties The useful lives of intangible assets are reas- greater of their net selling price and the value The Company recognize the contractual pen- sessed annually by Orange SA, which results in use. In assessing value in use, the estimated The cost is based on the weighted average alties at the moment of collection based on the in changes to the useful lives of certain assets. future cash flows are discounted to their pres- principle and includes expenditures incurred in historical data analysis showing that the prob- These changes are recorded as changes in ac- ent value using a pre-tax discount rate that re- acquiring the inventories and bringing them to ability of contractual penalties collection is low counting estimates on a prospective basis. flects current market assessments of the time their existing location and condition. (less than 50% on average) while the proba- value of money and the risks specific to the as- bility is assessed on the basis of an individu- set. For an asset that does not generate large- (j) Trade Receivables al contract level. The Company considers con- ly independent cash inflows, the recoverable tractual penalties as contingent assets. amount is determined for the cash generating The trade receivables are mainly short-term unit to which the asset belongs. with no stated interest rate and are measured
86 87 2017 Chapter VIII Annual Report
(k) Cash and Cash Equivalents costs, and are subsequently measured at am- the time value of money and, where appropri- traffic processed or contracted fee schedules ortised costs using the effective interest rate ate, the risks specific to the liability. The Com- when the service is rendered. Revenues due Cash and cash equivalents consist of balances method, with interest recognised on an effec- pany records a provision for asset retirement, from foreign carriers for international roaming with banks, and highly-liquid investments with tive yield basis. The Company’s financial liabil- a provision for retirement benefit cost and calls are included in revenues in the period in insignificant risk of changes in value. ities relates to overdraft on the current account a provision for litigations (see Note 14). which the call occurs. held by parent company Orange SA (ZERO bal- (l) Financial Assets ance as at 31 December 2017) and long term (p) Trade and Other Payables Certain prepaid usage services are billed in loan received from the parent company. advance, resulting in deferred income. Related Financial assets are classified into the fol- Trade and other payables are recognized ini- revenues are recognised based on the usage lowing specified categories: financial assets (n) Borrowing Cost tially at fair value. Subsequent to initial recog- or the expiry of the prepaid vouchers. as ‘at fair value through profit or loss’ (FVT- nition they are stated at amortized cost. PL), ‘held-to-maturity investments’, ‘availa- All borrowing costs are recognised in profit or The Company enters into multiple element ar- ble-for-sale’ (AFS) financial assets and ‘loans loss in the period in which they are incurred. As (q) Revenues rangements, which include the sale of hand- and receivables’. The classification depends the Company does not have any loans dedicat- sets, activation fees, and service contracts to on the nature and purpose of the financial as- ed to investment activities, there are no bor- The Company provides mobile and non-mo- customers through Orange-branded shops. sets and is determined at the time of the ini- rowing costs eligible for capitalisation. bile communication services to individuals These transactions include the sale of a mobile tial recognition. As at 31 December 2017, the and commercial and non-commercial organi- handset, the up-front charge of non-refundable Company holds trade receivables and current (o) Provisions sations. The Company generates revenue pri- activation fees to connect the customer to the cash-pool account held by parent company marily by providing digital wireless services for service, and subsequently monthly fees and Orange SA categorised as ‘loans and receiva- A provision is recognised when the Company voice and data as well as value-added servic- airtime fees charged during the contract peri- bles’ (2016: only trade receivables categorised has a legal or constructive obligation as a re- es, text, and multimedia messaging. To a less- od. The Company considers each element de- as ‘loans and receivables’). sult of a past event, and it is probable that an er extent, Orange Slovensko a.s. generates livered as a separately identifiable component outflow of economic benefits will be required revenue from the sale of wireless handsets, in- for the purpose of accounting of the transac- (m) Financial Liabilities to settle the obligation. If the effect is material, cluding laptops and tablet computers. tion, as the handset or mobile service contract provisions are determined by discounting the can be sold separately. The Company allo- Financial liabilities, including borrowings, are in- expected future cash flows at a pre-tax rate The Company recognises mobile usage and cates the consideration of all elements based itially measured at fair value, net of transaction that reflects current market assessments of roaming service revenues based upon the on the relative fair value of each elements and
88 89 2017 Chapter VIII Annual Report
recognize the first element delivered, i.e. the (s) Taxation Deferred Tax (t) Employee Benefits handset up to the price paid by the customer Deferred tax is provided using the balance for the handset. Income tax expenses for the year comprise sheet liability method, providing for tempo- Long-Term Service Benefits current and deferred tax and special levy. rary differences between the carrying amounts The Company’s net obligation in respect of Other service revenues are recognised when of assets and liabilities for financial reporting long-term service benefits is the amount of fu- delivered and accepted by customers and Current Income Tax purposes and the amounts used for taxation ture benefits that employees have earned in re- when services are provided in accordance with Current tax is the expected tax payable on the purposes. turn for their service in prior periods. The ob- the contract terms. taxable profit for the year, using tax rates en- ligation is calculated using actuarial methods acted or substantially enacted at the balance The amount of deferred tax provided is based and discounted to its present value using a risk Revenue and related expenses associated with sheet date, and any adjustment to tax payable on the expected manner of realisation or set- free interest rate. The Company’s employee the wholesale of wireless handsets to distribu- in respect of previous years. Taxable profit dif- tlement of the carrying amount of assets and benefits contain only retirement benefit. tors are recognised when the products are de- fers from profit as reported in the separate in- liabilities, using the tax rates enacted or sub- livered and accepted; as such, sales transac- come statement because it excludes items of stantially enacted at the balance sheet date in- tions are separate and distinct from the sale of income or expense that are taxable or deduct- cluding the special levy. A deferred tax asset wireless services to customers. ible in other years and it further excludes items is recognised only to the extent that it is prob- that are never taxable or deductible. able that future taxable profits will be availa- (r) Expenses ble against which the asset can be utilised. Special Levy Deferred tax assets are reduced to the extent Operating Lease Payments Special contribution made by a regulated en- that it is no longer probable that the related tax For operating leases, lease payments are ex- tity from activities in regulated industries. The benefits will be realised. pensed on a straight-line basis over the lease base for the levy is the economic result report- period. ed for the accounting period. The monthly levy rate was 0.726% for 2017 (2016: 0.363%) from the operating profit. The levy will gradually de- crease to 0.363% by 2021.
90 91 2017 Chapter VIII Annual Report
4. Property, Plant and Equipment
Fixtures Fixtures Land and Plant and Motor Under Land and Plant and Motor Under In thousands of EUR and ARO *) Total In thousands of EUR and ARO *) Total Buildings Equipment Vehicles Construction Buildings Equipment Vehicles Construction Fittings Fittings
Cost Carrying amount
As at 1 January 2016 4,638 793,035 5,452 32,807 23,298 37,455 896,685 As at 1 January 2016 3,427 268,115 2,973 10,115 16,616 37,455 338,701 Additions – – – – 636 69,933 70,569 Disposals – (105,192) (973) (3,787) – – (109,952) As at 31 December 2016 3,387 269,878 2,817 9,366 16,103 41,279 342,830 Transfer 266 61,349 775 3,719 – (66,109) – As at 31 December 2016 4,904 749,192 5,254 32,739 23,934 41,279 857,302 As at 1 January 2017 3,387 269,878 2,817 9,366 16,103 41,279 342,830
As at 1 January 2017 4,904 749,192 5,254 32,739 23,934 41,279 857,302 As at 31 December 2017 3,140 284,182 2,364 8,580 12,559 44,958 355,783
Additions – – – – 421 77,428 77,849 *) Asset Retirement Obligation (ARO) described in Note 14 Disposals (212) (19,921) (268) (1,909) (3,069) – (25,379) Transfer 125 70,350 495 2,779 – (73,749) – As at 31 December 2017, none of the proper- value of EUR 200 thousand) relating mainly to As at 31 December 2017 4,817 799,621 5,481 33,609 21,286 44,958 909,772 ties were pledged to secure bank loans. old fully depreciated equipment.
Accumulated depreciation In 2017, transfers from assets under construc- Property and equipment, excluding motor ve-
As at 1 January 2016 1,211 524,920 2,479 22,692 6,682 – 557,984 tion to property, plant, and equipment mainly hicles, is insured to a limit of EUR 729,534 Charge for the year 306 59,394 921 4,468 1,149 – 66,238 comprised investments to upgrade of the ex- thousand (2016: EUR 754,826 thousand). Each Disposals – (105,000) (963) (3,787) – – (109,750) isting network, particularly Mobile RAN (Radio motor vehicle is insured to a limit of EUR 5,000 As at 31 December 2016 1,517 479,314 2,437 23,373 7,831 – 514,472 Access Network) LTE + 2G/3G equipment & re- thousand (2016: EUR 5,000 thousand) for dam- As at 1 January 2017 1,517 479,314 2,437 23,373 7,831 – 514,472 leases and Mobile RAN Infrastructure and in- age on health and expenses related to death Charge for the year 372 58,943 910 3,558 913 – 64,696 crease in IP routers equipment & releases. and EUR 2,000 thousand (2016: EUR 2,000 Disposals (212) (22,818) (230) (1,902) (17) – (25,179) As at 31 December 2017 1,677 515,439 3,117 25,029 8,727 – 553,989 thousand) for damage caused by destroyed, *) Asset Retirement Obligation (ARO) described in Note 14 During 2017, the Company had a disposal in seized or lost items. gross value of EUR 25,379 thousand (book
92 93 2017 Chapter VIII Annual Report
5. Intangible Assets
Other Other Telecom. Under Telecom. Under In thousands of EUR Software Intangible Total In thousands of EUR Software Intangible Total Licences Construction Licences Construction Assets Assets
Cost Carrying amount
As at 1 January 2016 131,392 184,550 16,927 7,845 340,714 As at 1 January 2016 45,582 114,277 12,289 7,845 179,993 Additions – – – 13,649 13,649 Disposals (1,821) – – – (1,821) As at 31 December 2016 40,171 104,355 10,797 6,920 162,243 Transfer 13,825 – 749 (14,574) – As at 31 December 2016 143,396 184,550 17,676 6,920 352,542 As at 1 January 2017 40,171 104,355 10,797 6,920 162,243
As at 1 January 2017 143,396 184,550 17,676 6,920 352,542 As at 31 December 2017 37,030 94,436 9,313 6,201 146,980 Additions – – – 15,224 15,224 Disposals (13) – (196) – (209) Transfer 15,102 – 841 (15,943) – In 2017, the addition mainly comprises the As at 31 December 2017 158,485 184,550 18,321 6,201 367,557 purchase of an IT applications and software packages. Accumulated amortisation
As at 1 January 2016 85,810 70,273 4,638 – 160,721 During 2017, the Company had a disposal in Charge for the year 19,221 9,922 2,241 – 31,384 gross value of EUR 202 thousand (book val- Disposals (1,806) – – – (1,806) ue of EUR 6 thousand) relating mainly to old As at 31 December 2016 103,225 80,195 6,879 – 190,299 mostly fully depreciated messaging service As at 1 January 2017 103,225 80,195 6,879 – 190,299 platforms. Charge for the year 18,235 9,919 2,326 – 30,480 Disposals (5) - (197) – (202) As at 31 December 2017 121,455 90,114 9,008 – 220,577
94 95 2017 Chapter VIII Annual Report
6. Investments in Subsidiaries
In September 2017, the Company recognized cost of EUR 100 thousand represent an invest- Deferred tax assets and deferred tax liabilities are attributable to the investment in Orange Finančné služby, s.r.o. ment in the wholly-owned subsidiary Orange items detailed in the table below: at cost of EUR 200 thousand. As at 31 De- CorpSec, spol. s r.o. The subsidiary was reg- 31 December 2017 31 December 2016 cember 2017 the new subsidiary had limit- istered in the Commercial Register on 1 Feb- In thousands of EUR Assets Liabilities Net Assets Liabilities Net ed number of transactions which is immate- ruary 2005. The table below summarises the rial to publish. Investments in subsidiaries at a subsidiary’s financial information: Property, plant, and equipment – 24,187 (24,187) – 23,338 (23,338) Inventories 479 – 479 420 – 420 Receivables 1,933 – 1,933 1,681 – 1,681 Profit/loss In thousands of EUR Assets Liabilities Equity Revenues Accruals 5,818 – 5,818 5,721 – 5,721 for the Period Provisions 8,595 – 8,595 9,827 – 9,827 Net deferred tax 16,825 24,187 (7,362) 17,649 23,338 (5,689) As at 31 December 2017 508 171 337 1,080 65 As at 31 December 2016 697 175 522 1,080 73 Deferred tax assets and liabilities were offset industries of 8.712% of operating profit (2016: In 2010, the Company recognised an invest- 6 thousand, which is considered immaterial for on the grounds that the Company has the le- 4.356%). Effective from 1 January 2017 the ment in Nadácia Orange (hereinafter also re- the purpose of these financial statements. gally-enforceable right to offset their current tax statutory tax rate changed to 21% and for spe- ferred to as the “Foundation”) at a cost of EUR assets against current tax liabilities and the de- cial levy to 8.712%. The special levy would ferred taxes relate to the same taxation authority. gradually reduce to 4.356% by 2021. The rate effective from 1 January 2017 were used in the 7. Deferred Tax Assets and Liabilities The statutory tax rate for 2017 was 21% (2016: deferred tax calculation. 22%) plus the special levy for the regulated Movement in the deferred tax account is as follows: In thousands of EUR 31 December 2017 31 December 2016
At beginning of period – net deferred tax liability 5,689 4,358 Income statement 1,673 929 Change in tax rate via income statement – 402 At end of period – net deferred tax liability 7,362 5,689
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8. Inventories ■ Statistical method for the retail market: this is a set of relevant qualitative factors (ageing of based on historical losses and leads to a sep- late payment, other balances with the counter- In thousands of EUR 31 December 2017 31 December 2016 arate impairment rate for each ageing balance part). This method is used for carriers and op-
Raw materials and consumables 636 743 category. erators (national and international), local buy- Merchandise 20,111 16,362 ers, regional and national authorities. Provision for slow moving merchandise (1,611) (1,414) ■ Individual method: the assessment of impair- 19,136 15,691 ment probability and its amount are based on Previously-recognised provisions for slow- to secure bank loans. Changes in provisions moving merchandise were released for as- for slow moving merchandise are recog- Ageing of past due but not impaired trade and other receivables sets that were sold or donated. As at 31 nised under Note 18 line” Purchased goods December 2017, no inventories were pledged and services”. In thousands of EUR 31 December 2017 31 December 2016
Total receivable 89,790 65,715 Of which: 9. Trade and Other Receivables, non due 77,801 51,759 past due impaired 8,051 6,878 Net and Non-current Receivables past due not impaired 3,938 7,078 Less than 180 days 3,938 7,078 Between 180 days and 360 days – – In thousands of EUR 31 December 2017 31 December 2016 More than 360 days – –
Trade accounts receivable 106,461 93,965 Allowance for doubtful debts and receivables (29,171) (28,250) Movements in the allowance for doubtful debts Other receivables 12,500 – 89,790 65,715 In thousands of EUR 31 December 2017 31 December 2016
As at 31 December 2017, no trade receivables for receivables expected to be irrecoverable. Balance at beginning of the year 28,250 36,732 were pledged to secure bank loans. The trade Allowances for doubtful debts are currently de- Net charge against bad debt provision 921 (8,482) Balance at the end of the year 29,171 28,250 receivables are decreased by the allowance termined according to two methods:
98 99 2017 Chapter VIII Annual Report
Aging of impaired trade and other receivables exchange risk as they are denominated in the the Company’s current account. In the event of local currency. Maximum borrowing headroom an overdraft, the interest is paid on a monthly In thousands of EUR 31 December 2017 31 December 2016 is EUR 66 million. The balances bear an in- basis and is calculated as EONIA plus the fixed
Total impaired 29,171 28,250 terest rate calculated as EONIA (EONIA: Euro rate of interest. The interest rate was negative Overnight Index Average). Interest is account- rate 0.346% as at 31 December 2017 (negative Of which: ed for on a monthly basis and capitalised on rate 0.329% as at 31 December 2016). Less than 180 days 1,772 1,401 Between 180 days and 360 days 2,216 1,840 More than 360 days 25,183 25,010 11. Cash and Cash Equivalents Non-current receivables rate must be the prevailing market rate for the
type of customers: it is at least equal to the In thousands of EUR 31 December 2017 31 December 2016 Non-current receivables mostly represent re- company’s marginal borrowing rate plus the Cash on hand and cash equivalents 106 107 ceivables from sales of handset with payment expected customer credit loss. The discount Bank balances and deposits 8,714 5,983 on instalments that are payable in more than 12 rate used at inception remains unchanged over Cash and cash equivalents in the balance sheet 8,820 6,090 months. The receivables are discounted to the the instalment period. fair value at discount rate 3.44%. The discount The Company’s cash balance includes current current account held by Orange SA, except for bank accounts and overnight balances with reasonable level held for operational reasons. banks. The Company transfers free cash to its 10. Current Financial Assets
The balance of EUR 29,713 thousand (2016: (the successor company Orange SA) with the 12. Equity EUR 21,834 thousand) represents the receiv- aim of centralisation and optimisation of affili- able on the cash-pooling account of the Com- ated companies’ cash surplus under the best Share Capital (2016: 1,181,755), with a nominal value of EUR pany with Orange SA. On 15 March 2006, the technical and financial conditions and ensuring 33.19 each, 1 ordinary share (2016: 1) with Company signed a Centralised Treasury Man- a fine-tuning of the liquidity at the Group level. As at 31 December 2017, the authorised share a nominal value of EUR 13.78, and 1 ordinary agement Agreement with France Telecom S.A Cash balances are not subject to any foreign capital comprised 1,181,755 ordinary shares share (2016: 1) with a nominal value of EUR
100 101 2017 Chapter VIII Annual Report
0.66. Holders of these shares are entitled to Dividends 14. Provisions and Non-current Payables dividends as declared from time to time and are entitled to one vote per share at the gen- As at the preparation date of these financial Provisions eral meetings of the Company. statements the Board of Directors made no Provision for In thousands of EUR Other Total decision regarding the amount of dividends to Asset Retirement Reserves be paid from the 2017 profit. Balance at 31 December 2016 26,644 1,983 28,627 Provisions made during the year 876 317 1,193 Reserves of EUR 15,260 thousand (2016: EUR In June 2017, the shareholders approved a div- Provisions used during the year – – – 15,260 thousand) relate to the Legal Reserve idend payment of EUR 73 million related to un- Provisions reversed during the year (3,068) – (3,068) Balance at 31 December 2017 24,452 2,300 26,752 Fund, which is not available for distribution distributed profits from previous years at their and should be used to cover future losses annual general meeting. An amount of EUR 30 arising from business activities, if any. million was paid in June 2017 and EUR 43 mil- In thousands of EUR 31 December 2017 31 December 2016 lion was paid in December 2017. Non-current 26,751 28,626 Current 1 1 26,752 28,627 13. Loans and Borrowings A provision for asset retirement obligation was EUR 16,102 thousand) in the asset side of the On 30 June 2015 the Company signed a Cred- in June 2015 in amount of EUR 714 thousand recorded in the amount of EUR 24,452 thou- balance sheet (Note 4). it Facility Agreement with Atlas Services Bel- (0.34% from the Total Maximum amount of the sand, using the following assumptions based gium S.A.. The credit facility was drawn down Facility). Interest is paid on a quarterly basis and on an expert’s study: average costs of site Other provisions represent a provision for retire- in two tranches: Tranche A in the amount of is calculated as EURIBOR plus 0.89% margin. demolition of EUR 8 thousand, an average site ment benefit costs and provision for litigations. EUR 110,000 thousand was drawn down as at The interest rate was 0.561% as at 31 December usage of 15 years, discount rate of 1.707%, 30 June 2015 and Tranche B in the amount of 2017 (0.571% as at 31 December 2016). dismantling cost index of 3.00% and number EUR 100,000 thousand was drawn down as at of sites of 2,438 (2016: EUR 26,644 thousand, 20 June 2016. The final maturity date for Tranche The loan is unsecured and the Company may 15 years, 1.015%, 3.00%, and of 2,398 sites, A is 30 June 2019 and for Tranche B is 30 June use the funds for the general corporate opera- respectively). The Company records the car- 2020. The Company paid an arrangement fees tion purposes. rying amount of EUR 12,559 thousand (2016:
102 103 2017 Chapter VIII Annual Report
Non-current payables rate that ranges from 1.99% to 2.25%. The li- Payables within and after maturity ability is amortised using the effective interest Non-current payables of EUR 15,441 thousand rate method. 31 December 2017
(2016: EUR 17,050 thousand) represent long- within maturity within 360 days more than 360 In thousands of EUR Total term liability resulted from the capitalised un- Fair value of the liability using the discount rate period overdue days overdue
avoidable future spectrum fees payable to Tel- of 1.707% is by EUR 2.4 million higher com- Trade payables 55,758 13,798 470 70,026 ecommunication Office. The liabilities were pared to its carrying amount at the balance Accrued liabilities 12,404 – – 12,404 initially discounted to the fair value at discount sheet date. Tax liabilities (VAT) 5,677 – – 5,677 Liabilities to employees 9,102 – – 9,102 Other current liabilities 584 – – 584 Total 83,525 13,798 470 97,793 The payables in category “within 360 days overdue” were paid during January 2018. 15. Trade Payables and Other Liabilities 31 December 2016 Accounts payables are classified as current li- and the prevailing credit period on purchases within maturity within 360 days more than 360 In thousands of EUR Total abilities if the payment is due within one year or is from one to two months. period overdue days overdue
less. Trade payables are non-interest bearing Trade payables 44,453 3,071 88 47,612 Accrued liabilities 18,862 – – 18,862 In thousands of EUR 31 December 2017 31 December 2016 Tax liabilities (VAT) 5,741 – – 5,741 Liabilities to employees 10,949 – – 10,949 Trade payables 70,026 47,612 Other current liabilities 557 – – 557 Accrued liabilities 12,404 18,862 Total 80,562 3,071 88 83,721 Tax liabilities (VAT) 5,677 5,741 Liabilities to employees 9,102 10,949 Other current liabilities 584 557 Liabilities to employees include social fund liabilities Total 97,793 83,721 In thousands of EUR 2017 2016
As at 1 January 169 143 Additions 361 355 Utilisation 343 329 As at 31 December 187 169
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16. Deferred Income 19. Other Operating Expenses/(Income), Net
In thousands of EUR 31 December 2017 31 December 2016 Other operating expenses are presented in the table below:
Prepaid phone cards (Prima cards) 6,225 6,233 In thousands of EUR 2017 2016 Post paid customers 14,216 14,442 Other 193 209 Brand royalty and management fees 13,375 13,446 Total 20,634 20,884 Bad debt provision 2,710 400 FX differences net (125) 11 Other operating expenses 2,513 2,317 17. Reve nue s Total other operating expenses 18,473 16,174 Revenues are presented in the table below:
In thousands of EUR 2017 2016 Other operating income is presented in the table below: Mobile voice services 259,017 262,059 Mobile non-voice services 156,554 165,360 In thousands of EUR 2017 2016 Sale of equipment 64,435 55,344 Other revenues 74,678 69,135 Property fees 1,147 1,076 Total Revenues 554,684 551,898 Late payment interest on trade receivables 1,314 1,324 Gain on disposal of property, plant and equipment 7,471 8,305 Other operating income 29,054 4,221 Total other operating income 38,986 14,926 18. External Purchases External purchases are presented in the table below: Included in Other operating income in 2017 March 2018 – reported in Trade and other re- In thousands of EUR 2017 2016 is one-off settlement of the Company’s dam- ceivables (refer to Note 9). Cost of equipment sold 110,396 101,969 age claim. Half of the settlement will be paid in Purchased goods and services 75,345 75,486 Service fees and interoperator costs 88,770 84,693 Costs associated with non-current assets 12,841 12,894 Other 19,351 18,422 Total external purchases 306,703 293,464
106 107 2017 Chapter VIII Annual Report
20. Wages and Contributions 22. Financial Instruments
In thousands of EUR 2017 2016 Risk Management Policies (Note 11), long term debt/loan (Note 13) and Wages and salaries 25,517 26,168 equity attributable to equity holders of the par- Bonuses and untaken holiday payroll provision 4,551 6,207 The Company’s activities expose it to a varie- ent, comprising issued capital, reserves and Social contribution 13,363 12,103 ty of financial risks, including mainly credit risk. retained earnings as disclosed in Note 12. Other 2,285 1,876 Total wages and contributions 45,716 46,354 The Company’s overall risk management pro- gramme focuses on the unpredictability of fi- The Company reviews the capital structure nancial markets and the economic environ- regularly. Based on the review and the General 21. Income Tax ment and seeks to minimise potential adverse Meeting’s approval, the Company balances its effects on its financial performance. overall capital structure through the payment Reconciliation of the effective tax rate is shown in the table below: of dividends, the issue of new debt, or the re- In thousands of EUR 2017 2016 Capital Risk Management demption of existing debt. The Company manages its capital to ensure Income tax payable that it will be able to continue as a going con- The Company monitors capital on the basis from operating activities 31,563 27,942 Deferred income tax cern while maximising the return to sharehold- of the gearing ratio. This ratio is calculated from operating activities 1,673 929 ers and benefits to other stakeholders through as net debt divided by total capital. Net debt change in tax rate – 402 the optimisation of the debt and equity balance. is calculated as total loans (as shown in the Total income tax 33,236 29,273 separate balance sheet) less cash and cash The Slovak Corporate Tax is 21% effective from 1 January 2017. The capital structure of the Company consists equivalents. In thousands of EUR 2017 % 2016 % of cash and cash equivalents, cash pooling
Profit before tax 125,457 110,973 Income tax at the rate of 21% (2016: 22%) 26,346 21.0% 24,414 22.0% Income tax in respect of prior year (802) -0.6% 119 0.1% Special levy 8.712% (2016: 4.36%) for regulated businesses 8,108 6.5% 4,547 4.1% Impact of adjusting items: (416) -0.3% 193 0.2% permanent differences and other differences Total income tax 33,236 26.5% 29,273 26.4%
108 109 2017 Chapter VIII Annual Report
The gearing ratios as at 31 December 2017 and 2016 were as follows: Financial Risk Management
In thousands of EUR 31 December 2017 31 December 2016 The Company’s activities expose it to financial Foreign Exchange Risk
Cash and cash equivalents (8,820) (6,090) risks in foreign currency exchange rates and The Company’s exposure is to changes in Long term loan 210,000 210,000 interest rates. The Company does not use any USD, which represents a minor risk in respect Financial (assets)/liabilities (29,713) (21,834) official statistical methods for measuring mar- of the US dollar’s position to the total amount Net debt 171,467 182,076 ket risk exposures; however, management’s of liabilities/assets, and therefore no sensitivity Equity 284,366 265,078 assessments of the Company’s exposure to analysis was performed. those risks are described below: Net debt to equity 60% 69%
In measuring the capital structure manage- considered all to be available capital funds al- The carrying amounts of the Company’s foreign currency denominated assets and liabilities at the ment disregards the loans provided by the located to the Company. reporting date are as follows: shareholders or parent company, as these are
Liabilities Assets In thousands of EUR Main Categories of Financial Instruments 2017 2016 2017 2016
In thousands of EUR Note 31 December 2017 31 December 2016 Currency USD 2,575 3,012 1,119 684
Financial assets Cash and cash equivalents 11 8,820 6,090 Interest Rate Risk of the financial liabilities/assets, the Company Trade and other receivables 9 89,790 67,715 The Group’s Treasury department exercises the does not assume any risk relating to interest Current financial assets 10 29,713 21,834 policy of cash pooling of the Company’s avail- rate movements. Management has entered in Financial liabilities able funds to maximise economic returns and to loan contracts which are exposed to floating Current financial liabilities 10 – – to manage the cash optimisation and central- interest rates in the normal course of business. Long term loan 13 210,000 210,000 Trade payables and other liabilities 15 97,793 83,721 isation under the best financial conditions for Management policy is to enter in the variable most of the affiliated companies (see Note 10). interest rates borrowings contracts only. Man- Such instruments are not exposed to the risk of agement does not see the need to hedge the interest rate fluctuation. Owing to the character interest rates related to these contracts.
110 111 2017 Chapter VIII Annual Report
An increase or decrease of interest rate (EU- as the present value of the future cash flows Liquidity Risk The Group’s Treasury department exercises RIBOR, LIBOR) by 100 basis points, consider- discounted at market rate of interest at the re- Liquidity risk is the risk that the Company will the policy of cash pooling the Company’s avail- ing all other factors remain unchanged, would porting date. not be able to meet its financial obligations able funds to maximise economic returns and cause a decrease or an increase of profitabil- as they fall due. The Company’s approach to to manage the cash optimisation and central- ity by EUR 1,803 thousand (2016: EUR 1,882 Credit Risk managing liquidity is to ensure that it will al- isation under the best financial conditions for thousand). Financial instruments that could potentially ex- ways have sufficient liquidity to meet its liabili- most of the affiliated companies (see Note 10). pose the Company to concentration of coun- ties when due, under both normal and stressed The sensitivities were estimated based on year terparty risk consist primarily of trade receiva- conditions, without incurring unacceptable The following tables detail the Company’s re- end balances and the actual results might dif- bles and cash and cash equivalents. losses or risking damage to the Company’s maining contractual maturity for its non-de- fer from these estimates. reputation. Management monitors risks with rivative financial liabilities without provisions The Company considers that it has limited con- rolling 12-month forecasts of the Company’s in which the maturity is unknown. The tables Fair Values Versus Carrying Amounts centration in credit risk with respect to trade liquidity reserve (comprising loan facility and have been drawn up based on the undiscount- The fair value of trade and other receivables, accounts receivables due to its large and di- cash and cash equivalents) on the basis of ex- ed cash flows of financial liabilities based on cash and cash equivalents, finance lease re- verse customer base (residential, profession- pected cash flows. the earliest date on which the Company can be ceivables, trade and other payables, except al and large business customers) operating in required to pay. The table includes the princi- for long term payables (refer to Note 14) loans numerous industries and located in many re- pal and interest cash flows if applicable. and interest bearing borrowings with variable gions. In addition, the maximum value of the interest rate is approximated by their carrying counterparty risk on these financial assets is amounts as at 31 December 2017 as well as at equal to their recognized net book value. An 31 December 2016. analysis of net trade receivables past due is provided in Note 9. Basis for Determining Fair Values The fair value of trade and other receivables, In addition, should a customer fail to pay any cash and cash equivalents, finance lease re- due payment for services, the Company will lim- ceivables, trade and other payables, includ- it the customer’s outgoing calls and, thereafter, ing long term payables (refer to Note 14) loans the provision of services will be disconnected. and interest bearing borrowings is estimated
112 113 2017 Chapter VIII Annual Report
2017 The following tables detail the Company’s ex- earned on those assets. The inclusion of infor- pected maturity for its non-derivative financial mation on non-derivative financial assets is nec- Year end Less effective 1-3 3 months 1-5 5+ assets. The tables have been drawn up based essary in order to understand the Company’s In thousands of EUR Note than 1 Total interest months to 1 year years years month on the undiscounted contractual maturities of liquidity risk management as the liquidity is man- rate the financial assets including interest that will be aged on a net asset and liability basis. Non-current payables 14 – 138 413 1,102 8,960 29 10,642 Non-interest bearing 15 – 63,980 33,813 – – – 97,793 liabilities 2017 Financial guarantee – – – – – – – contracts Year end Less 1-3 3 months 1-5 5+ Long term loan 13 – – – 210,000 – 210,000 In thousands of EUR effective than 1 months to 1 year years years Interest and commitment interest rate month 13 0.561% – 295 884 1,206 – 2,385 fee from Long term loan Variable interest rate 10 – – – – – – Non-current receivables – – – – 11,624 – instruments Non-interest bearing receivables – 52,880 5,300 19,110 – – Total 64,118 34,521 1,986 220,166 29 320,820 Other receivables – – 12,500 – Cash and cash equivalents 0.02% 8,820 – – – – Variable interest rate instruments -0.346% 29,713 – – – – 2016 Total 91,413 17,800 19,110 11,624 –
Year end Less effective 1-3 3 months 1-5 5+ In thousands of EUR Note than 1 Total interest months to 1 year years years month 2016 rate
Year end Less 3 Non-current payables 14 – 134 402 1,073 8,723 6,718 17,050 1-3 1-5 5+ In thousands of EUR effective than 1 months Non-interest bearing months years years 15 – 37,685 46,036 – – – 83,721 interest rate month to 1 year liabilities Financial guarantee – – – – – – – contracts Non-current receivables – – – 8,869 – Long term loan 13 – – – 210,000 – 210,000 Non-interest bearing receivabless – 47,261 5,931 12,523 – Interest and commitment Cash and cash equivalents 0.02% 6,090 – – – – 0.571% – 300 899 2,427 – 3,626 fee from Long term loan Variable interest rate instruments -0.329% 21,834 – – – – Variable interest rate 10 – – – – – – Total 75,185 5,931 12,523 8,869 – instruments Total 37,819 46,738 1,972 221,150 6,718 314,397
114 115 2017 Chapter VIII Annual Report
23. Related Party Transactions In thousands of EUR 2017 2016 Purchases The immediate parent company and the ulti- respectively. Transactions with related parties Orange SA (ultimate control.party) 11,919 9,931 mate controlling party of the Company are have been conducted under standard busi- Atlas Service Belgium (mother company) 1,341 1,353 Atlas Services Belgium, S.A., (from August ness conditions. Receivables, liabilities, pur- Orange Polska (fellow subsidiary) 1,916 1,381 2008, up to July: Wirefree Services Nederland chases and sales with related parties are sum- Orange Brand Services (fellow subsidiary) 7,743 7,878 Orange CorpSec (subsidiary) 1,077 1,076 B.V.) and Orange SA (incorporated in France), marised in the following tables: Orange Romania (fellow subsidiary) 484 633 Orange Belgium (ex Mobistar) (fellow subsidiary) 795 219 In thousands of EUR 31 December 2017 31 December 2016 Other 148 1,033 25,423 23,504 Liabilities - current and unbilled supplies
Sales Atlas Service Belgium (parent company) 210,006 210,003 Orange SA (ultimate control.party) 1,981 1,913 Orange SA (ultimate control.party) 7,381 2,772 Orange Brand Services (fellow subsidiary) 1,956 1,943 Equant (fellow subsidiary) 2,330 2,307 Mobistar (fellow subsidiary) 1,051 1,420 Orange Polska (fellow subsidiary) 2,015 1,197 Orange CorpSec (subsidiary) 108 198 Orange Egypt for Telecommunications (fellow subsidiary) 1,769 – Orange Polska (fellow subsidiary) 631 611 Orange Brand Services (fellow subsidiary) 290 500 Other 263 826 Orange Romania (fellow subsidiary) 686 465 215,996 216,914 Orange Moldova (fellow subsidiary) 294 233 Other 315 228 Trade accounts receivable - current 15,080 7,702
Orange SA (ultimate control.party) 1,470 1,360 Orange SA - cash pool account 29,713 21,834 The following related party transactions are ■ Intra-group international telecom services – Orange Egypt for Telecommunications (fellow subsidiary) 1,893 – Atlas Service Belgium (parent company) 357 500 applicable for the Company: mobile and other telecom services with other Orange Moldova (fellow subsidiary) 289 122 group companies; and
Orange Polska (fellow subsidiary) 428 203 ■ Management fees, brand fees – transac- Orange Romania (fellow subsidiary) 118 85 tions mainly with Orange Brand Services and ■ Shared products – mobile and other telecom Other 399 293 34,667 24,397 Orange SA (ultimate parent company); services with other group companies.
116 117 2017 Chapter VIII Annual Report
24. Information on Income and Emoluments of Members of the Statutory Bodies, Total expenses for rent represent EUR 11 million and land and rooftops for base stations and (2016: EUR 11 million) and primarily represent other equipment. The Company maintains evi- Supervisory Bodies and Other Bodies office, retail space, technological premises dence of assets under lease contracts. of the Accounting Entity 26. Commitments and Contingencies The income and emoluments of the Company’s members of the statutory body, supervisory body and other bodies are summarised in the following table: Litigation assets in the amount of EUR 4,611 thousand The Company is not involved in any legal pro- (2016: EUR 2,971 thousand) and the other less In thousands of EUR 2017 2016 ceedings outside of the normal course of busi- material investments in long-life assets.
Board of directors – 32 ness except for litigations for which provision Supervisory body – 0 was created (see Notes 14, 27). Management The Company also has OPEX commitments in Executive Management Board 2,720 2,496 does not believe that the resolution of the Com- the total amount of EUR 28,030 thousand (2016: Total 2,720 2,528 pany’s legal proceedings will have a material ad- EUR 27,850 thousand) mainly related to the pur- verse effect on its financial position, the result of chase of handsets in amount of EUR 10,617 25. Operating Leasing the operations, or cash flows. thousand (2016: EUR 8,626 thousand) and net- work maintenance in amount of EUR 8,700 Leases as the Lessee technological premises, and land and rooftops Commitments thousand (2016: EUR 8,820 thousand). The Company is committed under operat- for base stations. The future aggregate mini- The Company has CAPEX commitments in a to- ing leases to terms ranging from 1 to 6 years, mum lease payments under non-cancellable tal amount of EUR 72,024 thousand (2016: EUR Legal Commitments which relate primarily to office, retail space, operating leases are as follows: 22,191 thousand). The biggest part of it in the The Company has not given any guarantees to amount of EUR 42,900 thousands relates to third parties in 2017 (2016: EUR 0 thousand). In thousands of EUR 31 December 2017 31 December 2016 gradual swap of Alcatel RAN technology with the
Less than one year 7,299 2,874 new one from NOKIA, starting from 2018. The Contingent Assets Between one and five years 12,015 6,478 rest consists of investment in 2G/3G network in The Company considers contract penalties as After five years 1,288 488 the amount of EUR 19,193 thousand (2016: EUR contingent assets as the probability of their col- Total 20,602 9,840 12,738 thousand), investments in 4G network lections is very low (below 50%).
118 119 2017 Chapter VIII Annual Report
31 December 2017 31 December 2016 In thousands of EUR 27. Critical Accounting Estimates, Increase Decrease Increase Decrease
Judgements and Key Sources Estimated useful life in years +/-10% 5,881 (7,188) 6,022 (7,360) of Estimate Uncertainty
The preparation of the financial statements in The Company makes estimates and assump- The sensitivities were estimated based on year for the current financial year, extrapolated for conformity with IFRS as adopted by the EU re- tions concerning the future. The resulting ac- end balances and the actual results might dif- future years by using the best estimate for the quires management to make judgments, esti- counting estimates will, by definition, seldom fer from these estimates. commitment settlement. It is discounted at a mates and assumptions that affect the appli- equal the related actual results. The estimates risk-free rate. This estimate is revised annual- cation of policies and the reported amounts of and assumptions that have a significant risk of Estimated Asset Retirement Obligation ly and the provision is consequently adjusted assets and liabilities, income and expenses. causing a material adjustment to the carrying The Company is obligated to dismantle techni- against the relevant asset where appropriate. The estimates and the associated assumptions amounts of assets and liabilities within the next cal equipment and restore technical sites when are based on historical experience and various financial year are discussed below: terminates its operation. The provision is based Sensitivity of ARO Reserves other factors that are believed to be reasonable on dismantling costs (on a per-site basis) in- A change in discount rate by 1 bps and change under the circumstances, the results of which Estimated Useful Lives of Property, curred by the Company to meet its environmen- in dismantling costs by 10% against initial as- form the basis of making judgments about the Plant and Equipment tal commitments over the asset dismantling sumption as at 31 December 2017 would have carrying values of assets and liabilities that are Useful lives, which are described in Note 3 (g) and site restorations planning. The provision is increased / (decreased) the Estimated ARO by not readily apparent from other sources. Actual and (h), are determined based on the Compa- assessed on the basis of the identified costs the amounts shown below: results may differ from these estimates. ny’s best estimate of the useful lives of long- 31 December 2017 31 December 2016 term assets and are reviewed annually. In thousands of EUR Increase Decrease Increase Decrease The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to ac- A change in estimated useful lives of assets Discount rate +/- 1bps 3,338 (3,906) 3,660 (4,288) Dismantling costs +/- 10% 2,445 (2,445) 2,664 (2,664) counting estimates are recognised in the peri- by 10% against the actual depreciation as at od in which the estimate is revised, if the revi- 31 December 2017 would have increased / The sensitivities were estimated based on year end balances and the actual results might differ sion affects only that period, or in the period of (decreased) the property plant and equipment from these estimates. the revision and future periods if the revision amounts as shown below: affects both current and future periods.
120 121 2017 Annual Report
28. Subsequent Events
No other events with a material impact on the true and fair presentation of facts as presented in these financial statements occurred after 31 December 2017 up to the preparation date of these financial statements.
29. Authorisation of Financial Statements
The financial statements were authorised for issue by management on 9 April 2018.
Pavol Lančarič Reza Samdjee Chief Executive Officer Chief Financial Officer
122 20 17
Orange Slovensko, a.s. Metodova 8 821 08 Bratislava Slovak Republic www.orange.sk