Annual Report 2010 / Telefónica Czech Republic, A.S
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Annual Report Content Introduction — — — — — — — — — — — — — — — — — — — — — — — — — 5— — — — — — — — — Independent auditor’s report — — — — — — — — — — — — — — — — — — — — — —5 — — — — — — Financial and operational highlights — — — — — — — — — — — — — — — — — — — — — — — — — 7 Letter from the Chairman of the Board of Directors — — — — — — — — — — — — — — — — — 9— — Calendar of key events in 2010 — — — — — — — — — — — — — — — — — — — — — — — — — — — 12 01 About Telefónica Group — — — — — — — — — — — — — — — — — — — — — — 17— — — — — — — 02 Board of Directors’ Report on Business Activity — — — — — — — — — — — — — — — — — 25— — Telefónica O2 Czech Republic Group — — — — — — — — — — — — — — — — — —25 — — — — — — — The telecommunications market in the Czech Republic — — — — — — — — — — — — — — — — — 30 Networks and technology — — — — — — — — — — — — — — — — — — — — — — — — — — 36— — — Voice services — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —37 — — — — Internet, data and value added services — — — — — — — — — — — — — — — — —39 — — — — — — Convergent services — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 42— — Payment services — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 42— — ICT services, solutions for business and for the government — — — — — — — — — — — — — — — 43 Interconnection — — — — — — — — — — — — — — — — — — — — — — — — — 44— — — — — — — — Comments on the financial results — — — — — — — — — — — — — — — — — — — — — — — — 45— — 03 Corporate Social Responsibility (CSR) — — — — — — — — — — — — — — — — — — — — — — — 52 Business Principles — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 52 Market conduct and customer care — — — — — — — — — — — — — — — — — — — — 53— — — — — Caring for employees and the workplace environment — — — — — — — — — — — — — 57— — — — Caring for the environment — — — — — — — — — — — — — — — — — — — — — — — — — 60— — — — Supporting communities — — — — — — — — — — — — — — — — — — — — — — — — — — — — —61 — 04 Corporate governance — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 66— Corporate governance of the Telefónica O2 Czech Republic Group — — — — — — — — — — — — — 66 Subsidiaries, associates and other ownership interests — — — — — — — — — — — — — — — — — 67 The organisation of Telefónica O2 — — — — — — — — — — — — — — — — — — — — 67— — — — — — Governing bodies — — — — — — — — — — — — — — — — — — — — — — — — — — — 69— — — — — — Board of Directors — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —71 — Executive management — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 74— Report by the Company’s Supervisory Board — — — — — — — — — — — — — — — — — 76— — — — Supervisory Board — — — — — — — — — — — — — — — — — — — — — — — — — 77— — — — — — — Audit Committee — — — — — — — — — — — — — — — — — — — — — — — — — 83— — — — — — — — Rules for the remuneration of persons with executive powers in the issuer — — — — — — —85 — — Other information relating to persons with executive powers — — — — — — — — — — — — — —— 90 Telefónica O2’s Declaration of Compliance with the Code of Good Corporate Governance based on OECD Principles (2004) — — — — — — — — — — — — — — — — — — — — — — — 92— — — Information relating to matters according to Section 118(5) of the Act No. 256/2004 Coll., the Capital Market Undertakings Act (CMUA), and information which is a part of a summary report compiled according to the requirement of Section 118(8) of the CMUA — — — — — — 100— — 2 Annual Report 2010 / Telefónica Czech Republic, a.s. 05 Consolidated financial statements for the year enden 31 December 2010 prepared in accordance with international financial reporting standards — — — — — — —105 — General information — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —106 — — Accounting policies — — — — — — — — — — — — — — — — — — — — — — — 112— — — — — — — — — Notes to the consolidated financial statements — — — — — — — — — — — — — — — —134 — — — — 06 Financial statements for the year ended 31 December 2010 prepared in accordance with international reporting standards — — — — — — — — — 164— — — General information — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —165 — — Accounting policies — — — — — — — — — — — — — — — — — — — — — — — 171— — — — — — — — — Notes to the consolidated financial statements — — — — — — — — — — — — — — — —193 — — — — 07 Other information for shareholders and investors — — — — — — — — — — — — — — —223 — — — Information on persons responsible for the Annual Report — — — — — — — — — — — 230 — — — Appendix: Report of the Board of Directors of Telefónica O2 Czech Republic, a.s. — — 232— — Glossary of terms and acronyms — — — — — — — — — — — — — — — — — — 243— — — — — — — 3 Annual Report 2010 / Telefónica Czech Republic, a.s. Introduction Introduction Independent auditor’s report To the Shareholders of Telefónica O2 Czech Republic, a.s.: I. We have audited the consolidated financial statements of Telefónica O2 Czech Republic, a.s. and its subsidiaries (“the Group”) as at 31 December 2010 presented in the annual report of Telefónica O2 Czech Republic, a.s. (“the Company”) on pages 85 – 140 on which we have issued an auditors’ report dated 18 February 2011, presented in the annual report on pages 87–88. We have also audited the separate financial statements of the Company as at 31 December 2010, which are presented in the annual report of the Company on pages 141–195 on which we have issued an auditors’ report dated 18 February 2011, presented in the annual report of the Company on pages 143–144 (both referred further as “financial statements”). II. We have also audited the consistency of the annual report with the financial statements described above. The management of Telefónica O2 Czech Republic, a.s. is responsible for the accuracy of the annual report. Our responsibility is to express, based on our audit, an opinion on the consistency of the annual report with the financial statements. We conducted our audit in accordance with International Standards on Auditing and the related implementation guidance issued by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the information presented in the annual report that describes the facts reflected in the financial statements is consistent, in all material respects, with the financial statements. We have checked that the accounting information presented in the annual report on pages 6–84 and 196–201 is consistent with that contained in the audited financial statements as at 31 December 2010. Our work as auditors was confined to checking the annual report with the aforementioned scope and did not include a review of any information other than that drawn from the audited accounting records of the Company. We believe that our audit provides a reasonable basis for our opinion. Based on our audit, the accounting information presented in the annual report is consistent, in all material respects, with the financial statements described above. III. In addition, we have reviewed the accuracy of the information contained in the report on related parties of Telefónica O2 Czech Republic, a.s. for the year ended 31 December 2010 presented in the annual report of the Company on pages 202–210. The management of Telefónica O2 Czech Republic, a.s. is responsible for the preparation and accuracy of the report on related parties. Our responsibility is to issue a report based on our review. 5 Annual Report 2010 / Telefónica Czech Republic, a.s. Independent auditor’s report We conducted our review in accordance with the applicable International Standard on Review Engagements and the related Czech standard No. 56 issued by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the report on related parties is free from material misstatement. The review is limited primarily to enquiries of company personnel, to analytical procedures applied to financial data and to examining, on a test basis, the accuracy of information, and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the report on related parties of Telefónica O2 Czech Republic, a.s. for the year ended 31 December 2010 is materially misstated. Ernst & Young Audit, s.r.o. License No. 401 Represented by Brian Welsh Partner Petr Vácha Auditor, License No. 1948 25 March 2011 Prague, Czech Republic 6 Annual Report 2010 / Telefónica Czech Republic, a.s. Introduction Financial and operational highlights Financial data is based on audited consolidated financial statements prepared in accordance with International Financial Reporting Standards. All figures, unless otherwise stated, are in CZK millions as at 31 December of each year. Financials 2010 2009 Revenues 55 712 59 889 OIBDA – Operating income before finance costs, tax, depreciation and amortization1 27 380 27 076 Operating income 15 524 15 075 Income before taxes 15 318 14 877 Net income 12 280 11 666 Total assets 92 792 92 768 Property, plant and equipment 56 651 57 545 Total equity 73 176 73 879 Financial debts 3 024 3 131 Capital expenditure 5 663 6 489 Operations (end of period) Fixed accesses (x 1,000) 1 669 1 771 ADSL connections (x 1,000) 806 725 Pay TV – O2 TV (x 1,000) 129 138 Mobile registered customers in Czech