Annual Report Annual Report 2015
Contents
Message from the CEO 3 1. Summary of Activity 5 Main Indicators 7 Results in 2015 8 Forecast for 2016 10 2. Angola Cables 13 Angola Cables Background 15 Corporate Governance 17 Business 19 Strategy 22 3. Context 25 Macroeconomic 27 Telecommunications Sector 31 4. Analysis of Activity 37 Commercial 43 Technical 49 Human Talent 53 Social Responsability 58
5. Financial Analysis 59 6. Financial Statements 73
7. Annexes 111
2 3 Annual Report 2015 Message from the CEO Dear Shareholders, In its third year of commercial activity, the company achieved a positive net income. EBITDA was five times higher than the previous year thanks to an increase in revenue (65%) and the containment of operating expenses. The growth in EBITDA margin reflects the substantial improvement in operational efficiency. These results were obtained during a year in which the company faced difficulties both in terms of the national economic adjustment process and the cut in the WACS submarine cable. The structuring of financing for the new submarine cables impacted enormously on the management's focus during the year. The Monet cable project was developed in 2015 in accordance with the contract working plan. Angola Cables In the final quarter of 2015, the first WACS submarine had a very active participation in the governance of the cable upgrade was completed, resulting in a fourfold project, in terms of technical aspects and decision- increase in Angola Cables's capacity. The substantial making. Challenges have been faced regarding the increase in available capacity will allow the company to management of the project. We have, however, been focus on growing sales in the international market, in focused on completing the project within the agreed time particular the African market. The cut in the WACS frames and have therefore been overcoming the submarine cable in shallow waters near the Sangano difficulties in a timely manner. station was a heavy blow to the company and demonstrated, in the worst possible way, the need for a During the second half of 2015, there was a change in the mutual and permanent restoration solution between funding structure for the new projects. Coordinated by WACS and SAT-3. the Ministry of Finance with the assistance of the Ministry for Telecommunications and Information Technologies The international development of the business, including (MTTI), the new financing model for the strategic projects preparing for commercial entry into Brazil with the new was established and construction of SACS was finally able cables and the data centre, as well as the development of to go ahead, with work beginning in the first quarter of the IP transit network, are important challenges facing 2016. the company in 2016. The company has succeeded in learning and growing from challenges, as well as adapting The company's management cares about establishing to changing situations and taking advantage of value strategic partnership relationships with the Ceará state creation opportunities. and Fortaleza municipal authorities in order to ensure future cooperation in developing business in the region in The results achieved are the fruits of the entire team's the areas of ICT and media. These authorities have been performance and commitment. There is now more behind a growth in the prospects of use of the data alignment between company and employee objectives, as centre by local companies. The culmination of this well as constant striving for improvement on both an partnership was the conclusion of the land concession individual and collective level. Our customers and agreement for the plot in the Praia do Futuro suppliers have also played an important role in these technological park, where Angola Cables will be building achievements. the data centre and SACS landing station, as well as the operations centre. However, since the Monet partners On behalf of the entire management team, I would like to did not approve the construction of the station on land thank the shareholders for their trusted support belonging to the Prefecture, new land was acquired, on throughout another year. which the Monet cable station will be built. As well as being the owner of the Monet station, Angola Cables will United we will go far. continue to invest in and promote its data centre and the António Nunes SACS station.
4 5 Summary of Activity 7 Annual Report 2015
Main Indicators
EBITDA Margin 2015 Asset Turnover Productivity of Human Talent
Sales / No. HR 30% 25% 49.8 Million Akz / HR +21 p.p. Sales / Total Assets compared with 2014 compared with 2014 +9 p.p. compared with 2014 +52%
EBITDA 2015 Return on Availability 1,311.4 WACS Investment of telecommunications systems Million Akz 99.96% IP 85% 99.92% Backhaul +439% Sales / Investment (WACS+CLS+NAP) compared with 2014 89.36% WACS
Income 2015 Value of Contracts Human Talent
4,329.3 7,166 Million Akz 87 Million Akz Value of contracts signed in Total Angola Cables employees at 2015 the end of 2015 + 65% + 230% +9% compared with 2014 compared with 2014 compared with 2014 +151% Growth in income from non- +82% 3,146 new service provision Hours of Angola Cables staff shareholder customers contracts compared with 2014 training in 2015 +123% compared with 2014
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Results in 2015
2015 ∆ 2015-2014 2014 ∆ 2014-2013 2013 Operating revenues (million Akz) 4,329 65% 2,623 36% 1,925 EBITDA (million Akz) 1,311 439% 243 558% -44 Net income for the year (million Akz) 551 280% -196 56% -450 Assets (million Akz) 17,169 3% 16,635 38% 12,052
Equity (million Akz) 11,624 5% 11,063 47% 7,519 EBITDA Margin 30% +21 p.p. 9% +11 p.p. -2% Financial Autonomy (Total Equity/Assets) 68% 1 p.p. 67% 5 p.p. 62% Immediate Liquidity (Cash and cash equivalents/Current Liabilities) 1.6 -0.1 p.p. 1.9 0.9 p.p. 1.0 Value of Contracts Signed During the Year (million Akz) 7,166 230% 2,172 40% 1,556 Number of Contracts Signed During the Year 82 82% 45 45% 31
Lead to contract ratio 71% 444% 13% +5 p.p. 8% Total number of employees 87 9% 80 29% 62
Number of hours of training 3,146 123% 1,411 47% 963 IP Traffic (peak) (Mbps) 6,176 1151% 491 -55% 1,100 WACS System Availability 89.36% -10.34 p.p. 99.70% -0.1 p.p. 99.8% Backhaul Availability 99.92% 0.82 p.p. 99.10% 0.4 p.p. 98.7%
IP System Availability 99.96% 0.16 p.p. 99.80% 0,8 p.p 99.0%
9 Annual Report 2015
Results in 2015
Angola Cables and the Completion of the first Award for Best Prefecture WACS upgrade, Participation in of Fortaleza sign a quadrupling Telecommunications cooperation agreement that Angola Cables's rights and at EXPOTIC includes the concession of capacity land for the construction of the data centre.
The boat sponsored Workshop by Afrinic to train Completion of work in by Angola Cables wins national ISPs at Angola Sangano for the the annual Refeno Cables facilities installation international regatta, of WACS Upgrade #1 between Recife equipment and Fernando de Noronha
Entry into service 1st national Angonix Installation of PoP of Angonix and addition promotion in Cape Verde of 11 Members. event
Unveiling of new facilities Participation in Installation of Lisbon PoP in the Dolce Vita AfricaCom, Africa's largest Condominium telecommunications event
10 Annual Report 2015
Outlook 2016
BUSINESS GROWTH The company's business growth is geared towards international development. In 2016, however, the domestic market will continue to be extremely • Developing relationships with the Prefecture of important to the company's sustainability, particularly Fortaleza and the state authorities within the with respect to IP transit. It is envisaged, however, that from 2017 onwards growth will be largely linked context of the established cooperation protocol, to the international market. In 2016, one of the thereby reducing entry barriers. company's primary objectives will be to increase our • Promoting the Fortaleza data centre as the digital presence in the African market. The establishment of content centre of the Ceará region, attracting points of presence (PoP) for enhancing international Brazilian content providers for regional and sales capacity is therefore fundamental to our growth international distribution (coverage of the major strategy. Portuguese-speaking market via SACS and WACS). The company will continue to focus its resources on developing four main areas: geographical EXPANSION OF THE CUSTOMER BASE diversification; expanding the customer base; diversifying revenue streams; and investing in The current Angola Cables customer portfolio is largely submarine cables and support infrastructures. made up of domestic customers, while the total number of customers remains modest. DIVERSIFICATION OF MARKETS Acquiring customers is crucial, both in terms of In order to reduce exposure to the Angolan market increasing the total number and diversifying their and align geographical positioning with current origin, thereby reducing exposure to country risk and investments, Angola Cables is preparing to: the risk of reduced income from the main customers. • Expand into the SADC market The customer portfolio will be much more diverse and • Offering capacity in other WACS stations. balanced with entry into the Brazilian market. With the • Creating PoP in South Africa. entry into service of SACS, in the medium term the • Developing the African African market should make up the bulk of the Telecommunications Hub programme, customer portfolio, though there is already untapped including the establishment of the potential with respect to WACS. connection backbone to the Indian coast and the African PoPs network, as well as The development of sales capacity outside the the expansion of AngoNAP II. domestic market is a priority for 2016. • Prepare a connection to the Asian continent. • Enter the Brazilian market • Making the subsidiary Angola Cables Brasil operational, implementing the strategy for entering the market in 2017, and marketing Monet capacity and the Fortaleza data centre.
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Outlook 2016
DIVERSIFICATION OF REVENUE STREAMS INVESTMENT IN INFRASTRUCTURES THAT This includes the development of new business, taking WILL SUSTAIN BUSINESS GROWTH advantage of synergies throughout the value chain • Monet and creating additional revenue to that generated • This infrastructure will allow entry into the by the main business (circuit wholesaler): Brazilian market and, generally, the North and • IP Transit South American markets. Monet now has high • Expansion of the PoP network and visibility in the international capacity optimisation of peering relationships in order wholesale market and has generated to improve service quality, create IP severity, expectation among market players with and consolidate regional hub status. respect to structural impact. Throughout 2016, Angola Cables will implement its entry strategy • Development of AngoNIX and increased as it trains its commercial and operational international exposure as one of the three teams in Brazil. largest African IXPs. • SACS • Attraction of root servers and CDN anchors to improve the competitiveness of the offer. • The conclusion of the financing agreement with the bank allowed the project to get under • Consolidation of the status of main IP Transit way at the end of the 1st quarter of 2016 and provider in the domestic market and it is envisaged that the cable will enter into acquisition of international customers. service at the end of the 2nd quarter of 2018. • Data Centre It will be the first submarine cable to be • Preparing the Fortaleza data centre for constructed under the sole responsibility of operation from 2017, exploring competitive Angola Cables (without partners), which will advantages and the privileged position for present the company with new challenges. hosting Lusophone digital content with export • Cable Landing Stations & Data Center in Fortaleza potential. • Construction of the Monet CLS for installing • Expansion of current capacity in the domestic the cable's electrical feed and optical market with the AngoNAP II project, a transmission equipment at the end of 2016. structural component of the strategy to create • Construction of the SACS CLS and the an African telecommunications hub in Angola. operational centre, including the NOC managed by Angola Cables. • Construction of the Fortaleza data centre, capitalising on synergies with the operation of the SACS and Monet submarine cables and other competitive advantages. Data centre in the technological park.
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Outlook 2016
EFFICIENCY GAINS • PoP Network To be competitive, Angola Cables must continually • Completion of the European PoP network strive to improve its performance. It is, therefore, (Lisbon, London, Madrid, Marseille, and necessary to enhance efficiency gains on various Frankfurt), with the aim of improving the levels, namely: quality of the IP Transit offer, directed towards • Better organisation and commercial activity the specific demand of target markets and processes for addressing the African market and supporting a new offer of connectivity based increasing the productivity of the sales force and on MPLS. the efficiency of collections. • Development of the African PoP network, with the installation of the Cape Verde (2015) and • Better organisation and technical activity processes Johannesburg (2016) PoPs and other PoPs to increase the quality and efficiency of services. supported by the connection backbone to the Indian coast, in order to explore the • Better skills and main company processes to competitive advantages of SACS and increase operational profitability. consolidate an African telecommunications hub in Angola. RISKS At the close of 2015, Angola Cables faced three risks that could have a significant impact on results in 2016: • Macroeconomic risk associated with uncertainty surrounding the forecasts for the Angolan economy, in particular GDP growth, exchange rate fluctuations, payments in foreign currency, and inflation control. • Market risk, associated with deceleration in growth and the increased difficulty of collection in the domestic market due to the macroeconomic situation, as well as the ability to penetrate the international market. • Financing risks relating to a delay in bank financing for the Monet project and the Fortaleza operational base, which may incur surcharges and penalties that are unaccounted for in the financial projections of the business plan.
13 Angola Cables 15 Annual Report 2015
Company history
Angola Cables was established in 2009 by the five The first challenge for Angola Cables was to main telecommunications operators in Angola. Its effectively manage participation in the WACS (West history is closely linked to Angola's need for an Africa Cable System) submarine infrastructure, active, well-structured telecommunications sector which was the largest and most developed African with a government plan for creating an independent submarine infrastructure at the time of its entity that is kept equidistant from the main establishment, and commercially exploit this asset in participating national operators through a order to generate added value for the sector. The representative shareholder structure that ensures commercial launch of the business was marked by efficient international access for the market. the completion of the Sangano station, where the cable is landed, and Angonap, which is the The plan of the Angolan government for the company's connection point with all the market telecommunications market will only be successful players that use its services. through cooperation and robust partnerships between the various players in the sector, whether Though a young company, Angola Cables needed to public or private, in order to ensure that a diverse grow quickly and effectively in order to meet the service offer is provided to end users. The challenges of one of the most dynamic and overarching objective is to ensure widespread competitive sectors in the world. Internet access with quality services and reasonable prices, transforming ICT into a driver of socio- economic development in the country.
Cape to Rio Regatta
Agreement with Epsilon Angonap construction Completion of WACS begins Quality and Efficiency Participation in the WACS Award Upgrade #1 consortium Definition of the Team Entry into service backbonelink between Angola Cables of Angonix Sangano and Angonap Building
2009 2010 2011 2012 2013 2014 2015
ADC Data Centre Viability Study Inauguration of WACS, Angonap, and Sangano Construction begins on the Launch of the Monet project Sangano submarine station Backbone Installation Preparation of the WACS system upgrade Launch of the SACS project
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Company history
VISION, MISSION AND VALUES
VISION CORPORATE VALUES The vision of Angola Cables is to make Angola one of Quality is a crucial factor in the sustained growth of the main telecommunications hubs in Africa. Angola Cables, ensuring competitiveness and customer loyalty. This is fundamental to maintaining MISSION the global reputation of Angola Cables as a benchmark telecommunications operator. The Angola Cables's mission is to ensure that Angola is quality of the products and services sold and the connected to the rest of the world and to foster the work carried out on a daily basis by the company's development of the telecommunications sector in employees are both crucial to success. Angola and Africa by providing high-quality, efficient international connectivity to national and Angola Cables invests in knowledge in order to international operators. make good use of its resources and provide a better service to its customers. This is one of the company's main focuses, with skill level and diversity being the primary intangible asset for thriving in an intensely competitive and ever-changing market. Transparency is a core value that enables Angola Cables to demonstrate its credibility and gain the trust of the community. Transparency in the management of the business is particularly important in terms of the position occupied by the company in the national market. Efficient management of material and human resources is one of the pillars of the organisation's management. This value naturally applies to operational management but also to all the company's other activities and to all levels of the organisation. For Angola Cables, efficiency is one of the main means of gaining a competitive advantage.
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Corporate Governance
SHAREHOLDER STRUCTURE In 2015, the corporate bodies elected in July 2012 for the four-year period 2012-2015 completed their final Angola Cables was established by the five main national year, with the changes reported in 2013 relating largely telecommunications operators, which make up the to the presiding board members of the shareholders' current shareholder structure. The company's majority meeting. shareholder is Angola Telecom (51%). The remaining shareholders are the mobile operator Unitel (31%), the Statutory Boards fixed operator MSTelcom (9%), the mobile operator General Meeting Movicel (6%), and the fixed operator Startel (3%). Supervisory Board
Board of Directors Angola Cables Shareholder Structure
3% Executive Committee 6% 9% GENERAL MEETING The Angola Cables General Meeting represents the 51% shareholders and deliberates on matters provided for in the company's by-laws, as well as on all other issues 31% that are not the responsibility of other company bodies. The General Meeting Board conducts the Meeting and comprises the Chairman, a Vice-Chairman, and a Secretary.
Composition of the General Meeting Board Angola Telecom Unitel MSTelcom Movicel Startel President Angola Eng. João Adolfo Martins Telecom Vice-President Movicel Angola Telecom is a public company aimed at offering access Engº José Henriques to telecommunications services throughout the country, demonstrating a strong commitment to social responsibility. Dra. Tidiane dos Santos Secretary Unitel A mobile telecommunications service provider, Unitel has been present in the market since 2001 and has more than 10 million customers, offering cover in all the country's SUPERVISORY BOARD municipalities. The Supervisory Board monitors the fiduciary MSTelcom is a subsidiary of Sonangol Group and, since 2003, has been a fixed telecommunications service operator. responsibilities of the executive bodies and is formed of two members and two alternative members.
Movicel has been in the market since 2003 and provides Composition of the Supervisory Board mobile telecommunications services to more than 3 million customers. Dr. João Salvador President MS Telcom Dr. João Ebo Voting Movicel Startel has been a fixed telecommunications operator since Member 2009 and its chief aim is "to be the customer's preferred Dr. Diamantino Carvalho Substitute Startel choice" by providing high-quality integrated solutions. Member Dra. Yolanda Guerreiro Substitute Unitel Member
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Corporate Governance
BOARD OF DIRECTORS EXECUTIVE COMMITTEE The Board of Directors is made up of shareholder The Executive Committee is responsible for the representatives and its functions are to provide day-to-day running of the company, providing representation, define strategy, and manage the regular and consistent feedback to the Board of company in accordance with the powers bestowed Directors on business developments and the upon it by the General Meeting. company's activities. It also submits proposals to the Board of Directors which create value for the company.
Angola Cables Executive Committee Composition of the Board of Directors
Dra. Naiole Cristina Cohen Angola dos Santos Guedes President Telecom António Nunes Chairman of the Executive Vice- Committee Eng. António José Nunes President Unitel Responsible for Commercial Direction and Marketing, the Human Talent Department, Angola and the Planning and Reporting Dr. Pedro José Manuel Member Telecom Department. Graduated in Electrotechnical Eng. from the Dresden Dr. João Filipe Melão Dias Member Unitel University of Technology in Germany in 1992. Eng. Roger Alexandre Ferreira Member MS Telcom
Dr. Paulo Jorge dos Santos Member Movicel Abreu Laura Carneiro Director Dra. Laura Tchinizolle Ferreira Carneiro Member Startel Responsible for Administration and Finance. Graduated in Financial Management from the Catholic University of Angola in 2007.
Pedro Manuel Director Responsible for Technical Direction and the Legal Department. Graduated in Law from the Law Faculty of the Agostinho Neto University in 2007, specialising in Legal-Economic Sciences.
19 Annual Report 2015
Business
POSITIONING The original positioning of Angola Cables in the The complementary roles of IP Transit operator and information and communications technologies data centre operator, as well as the natural position value chain was as an international transmission of wholesale operator, equidistant from the retail capacity provider (wholesale operator). From this operators, has allowed the company to assume basis, the company exploits its WACS capacity and responsibility for connecting the internet operators in invests in the expansion of its international Angola through AngoNIX, the Angolan IXP with the network, namely through the new SACS and Monet greatest international presence. submarine cables. The intense competition within its principal business and the potential of its assets oblige In 2015, Angola Cables focused Angola Cables to actively seek out diversification opportunities that have strong synergies with the mainly on growing its principal traditional business. business by exploiting the WACS In this way, Angola Cables has grown along the submarine cable, undertaking value chain, assuming the position of construction projects for new aggregator/distributor of IP traffic, which has become a principal electronic communications assets (SACS, Monet, and the technology. Fortaleza operational base), Similarly, exploring synergies, the company developing the IP Transit service, operates data centres in Angola with the Angonap and promoting AngoNIX. and Sangano technical centres and, from 2017, in Brazil, as the operator of the largest data centre in Fortaleza.
• Colocation ICT Value Chain • Hosting • Managed services • Cloud computing
Manufacturer System Application Content Communications Data Center Value Added of Hardware Integrators Products Producers and Software Operators Services Services
Transmission Communication Integrated Virtual Capacity Aggregators Operators Operators Providers
• Operators of • IP Transit submarine cables Operators • Wholesale • Carriers capacity • IXPs operators
20 Annual Report 2015
Business
SERVICE OFFER Angola Cables's main business consists in the The new SACS and Monet cables are equipped with wholesale of large blocks of international the latest generation technology. transmission capacity (multiple 155 Mbps circuits), which is used by telecommunications operators The international transmission capacity service (retailers) to carry the voice and data traffic consists in offering, to domestic and international generated or received within their networks. operators, high-speed circuits between two WACS cable landing stations, frequently terminating at Angola Cables currently markets circuit services one or two ends with access circuits for customer based on the capacity stock held by the WACS installations, which are leased to local operators. In (West Africa Cable System), a submarine cable that this way, the company offers its customers a high- consists of a fibre optic system that runs between quality, end-to-end service, largely using its own South Africa and the United Kingdom, with resources but having the capacity to integrate other connections at various points along the west coast operators. of Africa. In the near future, the company will also sell capacity held in two new submarine cables – The company also offers infrastructure and services Monet (2017) and SACS (2018). to the other members of the WACS consortium, allowing them to terminate their circuits at the Optical fibre technology (fibre optics) is more Sangano station or at the peering hub with other efficient at transmitting large volumes of operators and customers in Luanda (AngoNAP). information over long distances. The technology has evolved in recent years, allowing an ever greater By integrating itself along the value chain and volume of information per unit of time along the capitalising on the strong synergies with the same physical medium. This technological advance international circuit business, Angola Cables is able means the capacity of recent submarine cables is to offer an IP Transit service directed mainly at virtually infinite, which along with the long lifespan Internet Service Providers(ISP), corporate groups of submarine cables (25 years), means investment with internal communication networks that use IP in these assets translates to extremely attractive technology, and retail operators with lower profitability in the medium and long term. volumes of traffic.
VALUE
CIRCUITS IP TRANSIT DATA CENTER
The circuits enable large volumes of data to The IP Transit services allow national The data centre services consist in the be relayed, at the speed of light, between operators and ISPs to exchange domestic hosting of ICT and digital content equipment two points along the WACS fibre optic internet traffic and interconnect with Tier-I/II (Colocation), the connection of customers system (submarine cable). ISPs, improving quality and providing more (Cross-Connect), and the provision of efficient access to international content. associated operation and maintenance services.
21 Annual Report 2015
Business
Thanks to the array of interconnection agreements Exploiting the strong synergies with its technological (peering) with Tier I and Tier II ISPs established by infrastructure, Angola Cables also offers data centre Angola Cables and the quality of its international services. This currently consists in hosting ICT transmission circuits, the IP Transit service allows equipment (colocation), with or without the lease of Angola Cables customers high-quality, flexible access equipment, interconnection services (Cross- to the largest digital content providers in the world. Connect), and operation and maintenance services. This Angola Cables service is key to providing This offer is aimed mainly at domestic and foreign widespread Internet access in Angola, one of the producers/distributors of digital content. chief objectives of the Angolan Government's strategy in the area of information and By hosting digital content storage and transmission communication technologies. equipment at its operational centres, Angola Cables is exploring synergies with its two other lines of In this regard, Angola Cables developed AngoNIX business, circuits and IP, while also developing a third (Angolan Internet Exchange Point), a peering hub for facet of its business that has great and intrinsic value domestic Internet traffic exchange between national potential. ISP networks, which is a huge advantage for domestic Internet users due to the substantial improvement in quality and efficiency compared with previous connections abroad. By making use of the technology installed within AngoNIX and the skills developed with the Angolan IXP, Angola Cables is preparing to expand its IP service offer to neighbouring countries, using the competitive advantage offered by its submarine cable infrastructure and economy of scale to create a benchmark IXP in the SADC region.
22 Annual Report 2015
Strategy
STRATEGIC OBJECTIVES Angola Cables's strategy is aimed at maximising the value created by the intensive exploitation of its assets in order to remunerate shareholders at the level of the best n In three years of operations, the company has sold practices of comparable companies. WACS cable capacity equivalent to 85% of the initial In addition, the company aims to fulfil its mission of investment in the cable and additional infrastructures providing international transmission capacity to players in (Sangano station, AngoNAP, and backhaul). Since the the Angolan telecommunications market, thereby making cable has an expected useful life of 25 years, this an important contribution towards boosting and growing example illustrates the potential returns on the market, increasing Internet access among the investment. Angolan population, and supporting the development plan for the sector led by the Angolan Government, and An identical return is expected on the company's new therefore the socio-economic development of the strategic investments - the SACS and Monet cables. country. What is more, since these investments are largely financed by banks, thanks to the sovereign guarantee, Lastly, Angola Cables aims to realise its vision of an the potential returns for shareholders could be higher. African telecommunications hubhub based in Angola, improving skills and other national assets and projecting a Up until the second half of 2017, Angola Cables's main global image of an enterprising nation. operating asset will continue to be its stock of capacity in the WACS submarine cable. The increase in capacity achieved in the fourth quarter of 2015 will fuel the continued growth of the company and the increased VALUE CREATION profitability of the asset. Angola Cables creates value for its shareholders in two The wholesale international capacity market is fiercely ways. Firstly, the business generates sustainable competitive. However, thanks to its positioning in the operating income, which increases the intrinsic value of domestic market, the constant search for efficiency the company and may be partially distributed among gains, and the specialisation of the sales force and shareholders in the form of dividends following the initial other distribution channels, Angola Cables has heavy investment phase. Secondly, since the managed to increase its international market share shareholders are domestic telecommunications operators without sacrificing commercial margin. Scale and that use the company's services, the substantial specialisation are the sources of value creation that reduction in the price of these services in the domestic the company seeks to develop. market as a result of the company's activities has allowed, and will continue to allow, domestic operators In the current phase of the company, with only three to make profits equivalent to the savings made by years of activity and a bold development plan, value acquiring the services. The economies of scale resulting creation should not be at the expense of preserving from the sale of services outside Angola and the existing assets and avoiding the vicissitudes inherent in necessary improvements in service quality for competing rapid growth. During this phase, risk management is a in the international market benefit all domestic customers, especially shareholders, which are major central focus in the organisation's activities. customers.
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Strategy
BUSINESS GROWTH SUSTAINABILITY The telecommunications business in general, and However, the company cannot merely grow by particularly the wholesale capacity operator business, transforming capital into assets. The business that are economy of scale businesses, meaning Angola Angola Cables has been developing must continue to Cables needs to grow to remain competitive in the grow organically outside the creation cycle of large international market. infrastructures and provide shareholders and other stakeholderswith a good return on their investments. From early 2017, the new SACS and Monet submarine cables will allow Angola Cables to leap in scale, which Angola Cables bases its sustainability strategy on four will reinforce the profitability of its operations, not main pillars. just by increasing its stock of capacity but, above all, by providing complementarity between the three Firstly, the diversification of revenue streams. assets (including WACS). This perfect combination of Diversification of the offer, capitalising on the assets will allow entry into new markets, boost the synergies provided by technological and intangible pursuit of greater value, and diversify risks and assets in order to integrate into the industry value sources of income. chain (IP, IXP, Data Centre). Expansion of the customer base, reducing the influence of national operators. The SACS and Monet projects are, therefore, of Geographical diversification to reduce market risks particular strategic importance in the short and and serve global customers. The new SACS and Monet medium term due to their impact on the business plan cables will provide Angola Cables with a competitive and because they require the development of foothold in Brazil, a pivotal point for accessing the strategies for entering new markets. North and South American markets and a differentiating factor of the African hub. The simultaneity of projects, financial outlay, specific nature of the technology, entry barriers to new Secondly, efficiency gains. Increased efficiency markets, and the lack of high-level skills inherent in a through the acquisition, retention, and development young company mean that the challenge faced by of critical skills. Quality service based on a balance Angola Cables is exceptionally tough. between competitiveness and profitability, maintaining a sound reputation and widespread This requires the company to concentrate on essential renown. Improvement of the supply chain, in areas and the rigorous management of projects, and particular suppliers of dark fibre and access circuits for the shareholders to maintain a stable funding Last Mile customers in each market. framework. Thirdly, consolidating trust among customers, partners, and suppliers, minimising purchase and transaction costs, and fostering new business opportunities. Finally, innovation. Although very young, the company has been an innovator, especially in the domestic market (offer, quality of service, commercial relationship). The ability to anticipate change, to adapt, innovate, and evolve, within an ever-changing environment, will be essential attributes for Angola Cables in meeting its strategic objectives.
24 25 Context 27 Annual Report 2015
Macroeconomic
AFRICA Gross Domestic Product (GDP) in Africa should grow by Exports suffered due to the slowdown in the global 4.5% in 2015 and 5% in 2016, following a more modest economy and, in particular, the fall in the price of raw materials, yet are expected to return to growth in 2016 period of growth in 2013 (3.5%) and 2014 (3.9%), during with the global recovery. which several countries faced a variety of difficulties, particularly adjustments forced by the fall in oil prices (Source: African Development Bank/OECD). However, the world economy shows signs of recovery and Africa 2013 2014 (e) 2015 (f) 2016 (f) could soon return to the levels of growth seen before the global economic crisis of 2008-2009. Africa 3.5 3.9 4.5 5.0 Central Africa 4.1 5.6 5.5 5.8
East Africa 4.7 7.1 5.6 6.7
6,4 6,5 5,8 5,9 6,1 North Africa 1.6 1.7 4.5 4.4 5,3 5,5 5,5 5, 5, Southern 4,5 3.6 2.7 3.1 3.5 3,9 3,6 3,5 Africa 3,1 West Africa 5.7 6.0 5.0 6.1
Economic Growth in Africa by Region, 2013-2016 (%) Source: Statistics Department, African Development Bank 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: (e) estimate; (f) forecast (e) (p) (p)
África Africa Excluding Líbia
Economic Growth in Africa, 2002-2016 (%) Some African countries took advantage of the Source: Statistics Department, African Development Bank Note: (e) estimate; (f) forecast turnaround in the economic cycle by introducing structural reforms, especially to make direct foreign investment more attractive and reduce red tape costs Western Africa achieved growth of 6% in 2014 and 5% in for economic activity. Benin, the Ivory Coast, the 2015, though it has been severely affected by the Democratic Republic of Congo, Senegal, and Togo are negative impact of the Ebola epidemic. Despite the fall in even among the top ten countries in the world in terms oil prices, in Nigeria, one of Africa's largest oil producers, of most reforms made in recent years to stimulate the economy grew 6.3% in 2015 thanks mainly to non-oil economic activity. sectors, demonstrating healthy economic diversification. However, in Southern Africa growth was just 3.1% in 2015, checked by the deceleration of the economy in South Africa (1.5%). In several countries, growth was fuelled by increased internal consumption and public investment in infrastructure. However, in 2015 consumption was hit by foreign exchange restrictions and public investment was largely funded by sovereign debt issuances.
28 Annual Report 2015
Macroeconomic ANGOLA In Africa, production continues to be focused mainly The fall in oil prices is having a negative impact on the on agriculture, mining industries, construction, and to economy. The Angolan basket is projected to average a substantially lesser degree services and USD 53 a barrel in 2015 (Source: IMF), compared to manufacturing industries. Some countries, however, just over USD 100 a barrel in 2014, leading to a sharp have invested in the modernisation and structural fall in exports and tax revenue. transformation of the economy, encouraging new, more productive activities and diverting resources 2014 2016 from traditional activities towards new sectors, which 2015 2009 2010 2011 2012 2013 (f) then have a modernising effect on the traditional (e) (f) sectors. Real Economy (‘000.000 Akz / %) Gross Domestic For countries rich in natural resources, particularly oil, 5,989 7,580 9,780 11,011 11,985 12,713 12,227 14,658 the performance of the European and Chinese Product (Akz) economies will be crucial to increased exports and the * Oil GDP 2,662 3,396 4,641 5,030 4,864 4,531 3,104 3,994 stimulation of growth through fiscal policies. By * Non-Oil GDP 3,327 4,184 5,139 5,982 7,121 8,182 9,123 10,665 contrast, the low price of oil has provided importing Real Domestic countries such as Botswana, Mozambique, and Product 2.4 3.4 3.9 5.2 6.8 4.8 3.5 3.5 Rwanda with relief from inflationary pressure and (%) allowed them to introduce more expansionist * Oil GDP (%) -5.1 -3.0 -5.4 4.5 -1.1 -2.6 6.8 3.8 * Non-Oil GDP 8.1 7.6 9.5 5.5 10.9 8.2 2.1 3.4 monetary policies. (%) Consumer Most African governments have, however, adopted Prices cautious fiscal policies in order to maintain budgetary 14.0 15.3 11.4 9.0 7.7 7.5 13.9 13.0 deficits and public debt at sustainable levels, and the (end of per.) Exchange Rate effects on internal consumption are likely to be seen (Akz/USD) in 2016 for the most part. Official Rate 89.4 92.6 95.3 95.8 97.6 102.9 134.6 … (end of period) Oil (average, USD/barrel) Price of Angolan 60.8 76.5 108.7 110.9 107.3 100.7 53.0 53.0 oil The African economy is set to grow Price of Brent 61.9 79.6 111.0 112.0 108.8 98.9 53.4 53.0 by 5% in 2016, with the gradual oil Macroeconomic Indicators, 2013-2016 (%) increase in exports driven by the Sources: Angolan authorities and IMF estimates and forecasts recovery of the global economy. Note: (e) estimate; (f) forecast The industrial, construction, and service sectors are The low price of raw materials and continuing to adjust to the fall in private consumption and public investment, as well as the ongoing the difficulties involved with difficulties in obtaining foreign currency. In 2015, structural reforms and the inflation is expected to rise to almost 14%, while the central government deficit is set to fall to 3.5% of diversification of the economy, GDP, compared to the 6.4% recorded in 2014 (Source: within the context of the cautious IMF). fiscal policies adopted by most In 2016, the economic situation is likely to continue countries, translates to a slower presenting challenges, since it is not expected to be a return to the levels of growth seen in significant recovery in global oil prices. Growth is projected to remain at a stable 3.5% in 2016, driven the recent past. by growth in the oil sector of around 4% and slightly increased growth in the non-oil sector of 3.4%. Inflation should slow to 13% at the end of 2016, with the effect of the recent monetary restriction estimated to be felt more keenly in the second half of 2016.
29 Annual Report 2015
Macroeconomic
BRAZIL The effects of the reduction in external demand, as a 10,9 consequence of the slowdown of the more developed 9,5 8,1 8,2 7,6 6,8 economies, allied to the impact of severe fiscal 5,5 4,5 3,9 deterioration, led to an economic crisis that has been 2,1 3,4 exacerbated by a political crisis. The medium-term outlook is not favourable due to the effects of these 2009 2010 2011 2012 2013 2014 (e) 2015 (p) 2016 (p) coinciding economic and political crises. In view of the -3,0 -1,1 -2,6 slow recovery of the developed economies and this -5,1 -5,4 internal strife, it is likely that economic activity in Brazil will continue to deteriorate in 2016. SectorOil Sector Petrolífero SectorNon-oil NãoSector Petrolífero TaxaReal Growthde CrescimentoRate Real The Brazilian GDP could contract by 3% in 2016, Oil and Non-Oil GDP Growth Rate, 2009-2016 (%) following the 3.8% fall in 2015. The reduction in Sources: Angolan authorities and IMF staff estimates and forecasts internal consumption and investment were the main reasons behind economic recession in 2015. However, the expectation of a more positive trade balance The expectation of an improved business should stimulate economic growth from 2016. environment, more flexible exchange rate, and the
completion of structuring projects, especially with 7,2 regard to agriculture and infrastructure, raises hopes 5,1 3,2 2,7 2,4 1,3 that non-oil related GDP growth will gradually 0,5 0,0
accelerate in the medium term to 7% by 2020. -0,1 -0,4 -3 -2,5 Exchange rate stability was a key component of -3,8 -3,9 Angola's disinflation strategy from 2010-14. However, -10,2 the kwanza has depreciated by almost 30% in the last -12,2 -13,7 -13,6 12 months, since the fall in oil prices has substantially GDPPIB GFCFFBCF PrivateCons. PrivadoCons. Cons.Public PublicoCons. ExportsExport. ImportsImport. reduced the availability of foreign currency in the 2015 2016 2017 country. Since September 2014, when the National Bank of Angola (BNA) changed the nominal exchange rate as Gross Domestic Product and its components (%) Source: IBGE & BBVA Research an anchor for monetary policy, there has been a risk of higher inflation expectations. Even though it has reduced recently thanks to the gradual de- dollarisation of the economy, between 20112015 in particular, the transmission of the exchange rate to inflation has also been instrumental. Bearing in mind The Real (BRL) has depreciated by 38% against the expectations (Source: IMF) of a 10%-30% USD between the 1st quarter of 2015 and 2016, and overvaluation of the real effective exchange rate, it is by 70% since the beginning of 2014. This depreciation likely that monetary policy is aimed at ensuring that trend is likely to continue in 2016, though at a slower the evolution of monetary aggregates remains rate than that witnessed in recent times. Some consistent with inflation objectives. forecasts point towards a BRL-USD exchange rate of around 4.15 at the end of 2016 and 4.20 at the end of 2017 (Source: BBVA).
30 Annual Report 2015
Macroeconomic
The short and medium-term outlook for the Brazilian The prospects of fiscal balance have deteriorated, economy remains influenced by the need for fiscal which has led to a risk of sovereign debt being sub- adjustment and a more restrictive monetary policy in investment-grade in 2015. As a result, regaining the order to contain inflation, as well as a lack of confidence of foreign investors has become a priority, confidence on the part of investors due to the despite the added difficulties of fiscal policy within political instability. the context of a recession. In the medium term, a recovery could be stimulated by successful structural 2014 2015 2016 (p) 2017 (p) reforms, including taxation policy and the reduction of trade barriers and red tape costs, although such Gross Domestic Product (% growth) 0.1 -3.8 -3.0 1.3 reforms require political stability. Inflation (% year-on-year, end of period) 6.4 10.7 6.8 4.5
Exchange Rate (BRL/ USD, end of period) 2.7 3.9 4.1 4.2
SELIC Interest Rate (%, end of period) 11.7 14.3 14.3 11.5
Fiscal Income (% of GDP) -6.1 -10.2 -8.7 -7.6
Current Account (% of GDP) -4.3 -3.4 -2.7 -1.1
Macroeconomic Indicators, 2014-2017 Source: BBVA Research Note: (f) forecast
Unemployment is set to rise in 2016. Although inflationary pressure appears to be under control after reaching 10.7% in 2015, the return of inflation to a trend in line with the central bank's objective is facing the adverse impacts of the sharp depreciation of the real.
Unemployment and Exchange Rate Source: OECD (Organisation for Economic Co-operation and Development)
31 Annual Report 2015
Telecommunications Sector
AFRICA SUBMARINE CABLES In 2015, the African continent continued to be This cable will offer an alternative to SACS, thereby supplied by 13 submarine cable systems, distributed creating redundancy and adding value to the pioneering along the western and eastern coasts and the route across the South Atlantic. As well as SACS and Mediterranean basin. Since the various cables were CBCS, there is the much-heralded SAE (South Atlantic installed between 2010-2012, no other system has Express), although there has been no news of any entered into service. However, in 2015, WACS developments in the past year. capacity was increased for the first time by adopting 100 Gbps technology, quadrupling installed capacity. Submarine Cables in Africa
Canary Islands, Spain
Palmarejo, Cape Verde
The ACE announced the launch of the São Tomé and Príncipe – South Africa segment, although there is little Atlas Sat-3/SAFE GLO-1 TEAMS SEACOM EASSy EIG publicly available information about the project. A new Offshore 320 Gbps 800 Gbps 2500 Gbps 1280 Gbps 1280 Gbps 10 Tbps 3840 Gbps SEA-ME- I-ME-WE LION ACE MaIN OnE WACS SAS-1 cable will connect Cameroon and Nigeria (NCSCS – WE4 3840 Gbps 1300 Gbps 5120 Gbps 10 Tbps 14.5 Tbps 1280 Gbps 1280 Gbps Nigeria-Cameroon Submarine Cable System). SEAS Lion2 320 Gbps 1280 Gbps On the east coast, the Gulf2Africa (G2A) cable was Active submarine cables on the African continent announced, which will connect Oman and Somalia from Source: Submarine Telecoms Industry Report 2015 & the end of 2016. Telegeography’s Submarine Cable Map
In 2015, some new projects were announced, LAND-BASED NETWORKS demonstrating investor confidence in the potential growth of the market in the medium term. A new Access to submarine cable capacity by inland areas continues to be the sector's main challenge. African transatlantic cable was announced between operators have invested heavily in the installation of Cameroon and Brazil (CBCS – Cameroon-Brazil Cable terrestrial fibre optics, yet the wholesale offer of land- System), which was set to enter into service at the based transmission capacity is still either non-existent end of 2017, although this date appears to be or extremely insufficient in large swathes of the overambitious. continent.
32 Annual Report 2015
Telecommunications Sector
EVOLUTION OF DEMAND It is the mobile operators that have invested most in Demand for international transmission capacity from expanding the capillary of land-based networks, African countries increased fivefold between 2010- though exclusively for their own use in the majority 2014, to a volume of 2.4 Tbps. More than half this of cases. However, some governments have invested demand originates from just three countries: in the establishment of national fibre optic rings and Morocco, Egypt, and South Africa. metropolitan networks, which wholesale operators complement with their own infrastructures to create There was a more substantial increase in demand in multinational networks and connect to submarine the countries that have recently invested in cable landing stations. developing their communications infrastructure. In the two countries where all five west coast Several countries, namely South Africa, Nigeria, submarine cables land, Ghana and Nigeria, average Senegal, Ghana, Kenya, and Tanzania, already have annual growth between 2010-2014 was 114% and extensive fibre optic networks, yet coverage in the 87% respectively. On the east coast, Tanzania and interior of the content remains extremely limited. Mozambique, which provide neighbouring inland countries with access to the EASSy and SEACOM The World Bank is providing financial support for cables, average annual growth during the same initiatives by African nations aimed at improving period was 122% and 127% respectively. In Uganda, national telecommunications networks. This funding which has no direct access to the submarine cables is through two main ongoing programmes – the West but whose government and wholesale operators Africa Region Communications Infrastructure Project have invested in fibre optics, the average annual (WARCIP) and the Central African Backbone (CAB), growth in capacity demand stands at 83% since 2010. aimed at developing regional and international connections and, ultimately, interconnecting all the domestic networks in the region. The WARCIP International capacity used by African countries, 2010-2014 programme spans nine countries in the Economic (Mbps) Community Of West African States (ECOWAS) and mainly provides funds for connecting these countries 2010 2011 2012 2013 2014 CAGR to the ACE submarine cable. The CAB programme is Algeria 40 352 51 823 75 573 116 200 157 177 40% focused on two main areas: the connection from Angola 1 232 2 126 6 327 21 995 29 921 122% Chad and the Central African Republic to the ACE Benin 998 1 309 1 839 2 298 3 490 37% Botswana 1 048 2 327 3 186 6 123 13 375 89% landing station in Cameroon, and the interconnection Burkina Faso 849 1 202 1 638 2 325 3 346 41% of the Gabon and Democtratic Republic of Congo Cameroon 978 1 913 5 378 8 139 17 061 104% domestic networks. Ivory Coast 4 471 6 803 8 901 16 159 21 571 48% Djibouti 2 308 8 894 16 756 43 723 49 746 115% Egypt 155 800 196 674 270 035 351 588 501 972 34% Ethiopia 3 600 4 660 6 445 9 185 14 112 41% Ghana 3 375 5 733 15 306 33 527 70 732 114% Kenya 10 184 19 368 31 866 117 348 137 553 92% Libya 3 434 5 382 8 211 12 029 15 892 47% Mauritius 3 583 7 148 16 103 21 776 33 472 75% Morocco 91 704 120 015 156 340 316 647 507 079 53% Mozambique 1 222 2 179 3 651 29 484 32 395 127% Namibia 2 377 3 918 6 412 12 274 14 554 57% Nigeria 15 757 34 935 64 059 124 795 191 314 87% Senegal 6 487 8 912 12 248 19 196 31 213 48% South Africa 47 556 63 271 114 825 229 065 341 523 64% Sudan 7 742 14 737 25 718 65 584 99 876 90% Tanzania 2 985 5 871 10 551 55 173 72 888 122% Tunisia 42 725 68 583 95 811 102 988 134 515 33% Uganda 2 360 4 164 6 527 21 603 26 541 83%
Source: TeleGeography
33 Annual Report 2015
Telecommunications Sector
More than 85% of international communications traffic SACS, which is set to begin construction in the first originating in Africa is destined for Europe. Although this quarter of 2016 and enter into service in the first percentage has fallen over the last four years due to the quarter of 2018, will open up the African continent, via increase in intra-African traffic (12%), Europe will continue Angola, to a pioneering transatlantic route in the to have the natural monopoly on internet provision to southern hemisphere, providing a direct link with Brazil Africa, at least until an alternative route is opened in the and, through the Monet cable, the United States. SACS South Atlantic (SACS) to provide low latency access to ISPs will interconnect with WACS at the Sangano station in the United States. and with Monet at the Fortaleza station, both of which The Internet is the major source of growth in African belong to Angola Cables. transmission capacity demand, as is the case in the rest of the world. The construction of fibre optic networks in the SACS will offer sub-Saharan African countries, which main African cities and the expansion of mobile include seven of the ten largest telecommunications communications networks, in particular the installation of markets in Africa, the fastest connection to North 4G (LTE) technologies, are the defining factors in the American ISPs. growth of capacity demand. Total Total planned At the end of 2015, 50 African mobile operators already System RFS had functioning LTE networks. Operator investment in length (km) capacity mobile broadband, the profusion of cheap smartphones (less than US$50), and the rise in digital literacy will mean SAT-3 2002 13,000 340 Gbps a growth in the number of mobile broadband (3G and 4G) users in Africa from 222 million at the end of 2015 to 1 Adones 2009 1,800 80 Gbps billion in 2020 – corresponding to a growth in broadband penetration from 23% to 76% among mobile WACS 2012 16,000 5.12 Tbps communications users (source: Ovum). SACS 2018 6,165 40 Tbps
Submarine cables landing in Angola ANGOLA In September 2015, the award of the SOOC (Sonangol SUBMARINE CABLES Offshore Optical Cable) project to Alcatel-Lucent In 2015, the most significant fact regarding transmission Submarine Networks was announced. However, the capacity via Angolan submarine cables was the increase in project was placed on standby due to the oil price WACS capacity, which quadrupled. crisis. The SOOC would extend for 1900 km and would connect the offshore oil and gas drilling platforms to During the cut in the Sangano segment of the cable, a four landing stations along the Angolan coast, at the portion of WACS traffic was restored by SAT-3, via the same time ensuring a fibre optic link between Cabinda Cacuaco station and interconnection with WACS in South and Luanda. Africa. This unfortunate event demonstrated the importance of mutual restoration capacity between the The new ACE segment between São Tomé and Príncipe two submarine cables and the need for permanently and South Africa, whose construction was announced available transmission means and operational agreements in 2015, envisages a link to Angola, in the Luanda that, in the event of an interruption to one of the cables, region. However, at this time the details of this allow the rapid restoration of international traffic from possible link are unknown. Angola via the other cable.
34 Annual Report 2015
Telecommunications Sector
BRAZIL EVOLUTION OF DEMAND SUBMARINE CABLES Of 20 countries, Angola scores second highest on Monet will be the next submarine cable between Ovum's Digital Media Opportunity Index for sub- Brazil and the United States (Miami) to enter into Saharan Africa, behind only South Africa and followed service, in the first half of 2017, followed by Seabras-1 by Kenya, Nigeria, and Ghana. This index combines 50 (New York), also in 2017. These two cables will indicators – including connectivity, adoption of digital substantially increase installed transmission capacity devices, existing availability of content and services, between the fourth (Brazil) and first (USA) largest consumer potential, capacity for monetising content, telecommunications markets in the world. However, and the cultural development index – to estimate the the growth potential of this route continues to attract growth potential for the digital content and services investors and a new cable (BRUSA), set to enter into market in each country, including applications, digital service in 2018, was announced by Telefónica's new music services, digital media, OTT video, and video infrastructure operator (Telxius). games services. SACS will open a new route to Africa (and Europe, via The public and private sectors continue to make WACS) from 2018. Construction on the CBCS structural investments with the aim of increasing the (Cameroon-Brazil Cable System) may be completed population's access to telecommunications services. the same year, connecting Brazil (Fortaleza) to Information technologies are increasingly widespread Cameroon. EulaLink, which aims to link Brazil and and the population has more access to mobile Portugal, with a landing point in the Canary Islands, communication and Internet services. has not yet secured the necessary funding for commencing the project.
22,5 23,0 21,3 19,1 16,9 14,8
10,0 6,0
2009 2010 2011 2012 2013 2014 2015 2016
Evolution of the Internet Penetration Rate in Angola 2009-2016 Sources: International Telecommunications Union & Internet Live Stats Report on Angola Internet Users
Both mobile communications operators launched commercial 4G (LTE) services in 2015 and one of them demonstrated, for the first time in Africa and one of Active submarine cables in Brazil the first in the world, the use of LTE-Advanced in a Source: Brazilian Ministry of Communications commercial network to reach transmission speeds of 450 Mbps. These investments also promote the use of fixed broadband due to the paucity of ground-based infrastructure. The introduction of low-priced smartphones onto the market and the launch of new digital services, such as music distribution, are other significant factors in boosting demand, with repercussions on international transmission capacity.
35 Annual Report 2015
Telecommunications Sector
EVOLUTION OF DEMAND
Additionally, in September 2015, the Pacific Latin America, and Brazil in particular, continues to be Caribbean Cable System (PCCS) entered into service in one of the regions with the highest growth in demand Latin America, linking Ecuador and various points in for international capacity. Between 2010-2014, Central America to the USA. The South American international transmission capacity grew by 45% per Crossing cable was extended to the Colombian coast year on average, a much higher figure than in Europe in the Pacific Ocean. The South America Pacific Link and North America. was announced, which will connect Chile and Panama In contrast to the majority of other regions, Latin to Hawaii, with an extension (SAPL Caribbean Express) America in general increased its reliance on the to Florida, and which is scheduled for completion in United States for international connectivity. In 2014, 2017. In November 2015, construction of the Tannat 87% of Latin America's total international capacity cable between Brazil (Santos) and Uruguay was connected to the USA, while 12% corresponded (Maldonado) was also announced, in a partnership to intra-regional capacity. This reliance is largely between Google and Antel; it will interconnect with explained by the access to US Internet operators, Monet in Santos. In March 2016, Google announced mainly in Miami. the Júnior cable, between Rio de Janeiro and Santos, which will interconnect with Monet and Tannat in In Brazil, the growth in international Internet traffic is Santos. closely related to the increased demand for broadband services, driven by regulatory policies that LAND-BASED NETWORKS have attracted domestic and foreign investment, namely for the installation of fibre optics for Brazil now has a diversified offer of optical individual users (FTTH). In addition, the spectrum transmission infrastructure, above all in the main reallocation to broadband mobile applications led to cities. Investment has recently been relocated for the rapid expansion of 4G (LTE) technologies, to the coverage in more inland areas, namely the north and extent that, by mid-2016, the number of 4G users central regions, for interconnection with other should surpass that of 2G users. national South American networks and the installation of 100 Gbps technology in the older Continuing the trend of the more developed markets, networks. content providers like Google, Microsoft, and Facebook are accounting for an ever greater portion Operators such as Internexa, in South America, and of the demand for capacity in Latin America. Although REDCA, in Central America, have been investing public Internet accounted for 83% of international heavily in intra-regional networks, connecting to capacity in 2014, private network capacity, including submarine cables. content providers, grew by 55% on average between 2010 and 2014.
36 37 Analysis of Activity 39 Annual Report 2015
Relevant Events
RELEVANT EVENTS IN 2015 In its third year of operations, Angola Cables focused The events relating to Angola Cables's activity during mainly on commercial development, infrastructure, and 2015 are listed below in chronological order. its human resources.
▪ Participation in the PTC'15 conference, in Honolulu, Hawaii JAN ▪ Conclusion of a land concession and cooperation agreement with the Prefecture of Fortaleza for the FEB development of ICT in the region, boosted by the SACS and Monet cables, the data centre, and the Angola Cables ▪ Partnership with Akamai for providing cache services to operational centre Angola Cables's IP Transit customers MAR ▪ Entry into service of AngoNIX, the Angolan and regional IXP ▪ Approval of the 2014 Report and Accounts at the ▪ Participation in the LATAM'15 conference, in Rio de APR Ordinary General Meeting Janeiro, Brazil ▪ Participation at the IAD Summit, in Zimbabwe ▪ ▪ Participation at Expotic, in Luanda Participation in EastAfrica.com in Nairobi, Kenya ▪ Participation in "International Telecoms Week" (ITW), in MAY Chicago, USA ▪ ▪ Participation at Globalcom in Luanda, Angola Annual Management Meeting JUN ▪ Cut in the WACS fibre optic cable at the Sangano segment
▪ Conclusion of the land concession agreement with the Prefecture of Fortaleza for the construction of the SACS JUL ▪ Participation at GAMESCOM, one of the largest electronic landing station and a data centre by Angola Cables games events in the world, in Koelnmesse, Germany, ▪ Completion of repairs to the cut in the WACS fibre optic with a view to establishing cash partnership with some of cable and return to normal traffic in the Sangano station AUG these players segment ▪ Installation of WACS Upgrade #1 equipment in Sangano ▪ Participation at the Connect to Connect Summit in Tanzania ▪ Participation in the African Peering and Interconnection ▪ 1st national AngoNIX promotional event Forum, in Maputo, Mozambique ▪ Boat sponsored by Angola Cables wins the annual Refeno SEP international regatta between Recife and Fernando de Noronha (Brazil) ▪ Participation in the Oracle workshop on Cloud Computing ▪ Installation of root replica server (IP) ▪ Participation at Futurecom, one of the largest technology OCT events in Latin America, in São Paulo, Brazil ▪ Afrinic Training Workshop for domestic ISPs at Angola ▪ Participation at the 2015 Capacity Europe event in Cables's facilities Paris, France ▪ Presentation of Angola Cables projects at the InfoBrasil ▪ Participation at AfricaCom, the largest NOV event, in Ceará, Fortaleza telecommunications event in Africa, in Cape Town, South Africa ▪ Completion of SDH PoP installation in Lisbon ▪ Participation at the DE-CIX Summit, in Frankfurt, Germany and Istanbul, Turkey DEC ▪ In partnership with the Kitabanga Project and aimed at the children of Sangano, funding was provided to paint the primary school and buy toys for the pupils ▪ Celebration of Angola Cables's anniversary
40 Annual Report 2015
Relevant Events
MONET MONET is a fibre optic submarine cable system Throughout 2015, various other activities were between the United States and Brazil, which is being performed, mainly relating to the study on the constructed by Angola Cables in collaboration with underwater cable route, the topographic survey of the seabed, authorisation for installing the cable and Google (USA) and two international importing equipment, the manufacture of the optical telecommunications operators, Algar Telecom (Brazil) fibre, the cable, and the underwater repeaters, and and Antel (Uruguay). the selection of cable landing points and termination station locations. The submarine cable extends for 10,556 km and terminates at the Boca Raton (USA), Fortaleza and The project will enter some significant phases in 2016, Santos (Brazil) stations. The total transmission in particular the construction of the Fortaleza and capacity is 64 Tbps, in 6 fibre optic pairs. Santos stations, as well as the construction of the beach manholes and cable ducts leading to the Angola Cables owns two fibre optic pairs, with a stations, the laying of the cables on the seabed, and capacity of 24 Tbps. the installation of station equipment. In addition, in 2016 Angola Cables will hold a tender for acquiring the optical transmission equipment to be installed in the three stations and extended to São Paulo (Santos backhaul).
The main Monet system supplier is Tyco Electronics Subcom (USA). Construction began on 8 October 2014 and the system is expected to enter into service in the second quarter of 2017. In February 2015, the final system design review was completed and there was a demonstration of the MONET CLS technology's compatibility with the specifications at the supplier's laboratories. Angola Cables will be building the Monet station in Fortaleza at a dedicated site close to the land granted by the Prefecture for constructing the SACS CLS and the data centre. In 2015, work was carried out with respect to the selection and acquisition of the land, the topographical survey, the ground study, and construction projects for the station, beach manhole (BMH), and the land cable duct (between the BMH and the station). The BMH and the duct should be completed in July 2016 and the station by the end of the year.
41 Annual Report 2015
Relevant Events
ANGONIX
On 16 March 2015, AngoNIX entered into service. This AngoNIX also optimises the use of international piece of infrastructure is a strategic icon for Angola transmission capacity, reducing costs for its members. Cables in terms of its vision of developing the Internet in Angola and its expansion throughout the region. The platform is located in AngoNAP, Angola Cables's connection hub and data centre in Luanda. AngoNIX was developed with technical and operational collaboration from De-CIX, the largest European IXP. The technology is robust and scalable, allowing Angola Cables to successfully grow the platform and become a regional benchmark and one of the major African IXPs. As well as being important to the development of the Internet within the country, AngoNIX is also a structural component of Angola Cables's strategy to create IP severity and the African telecommunications hub. At the end of 2015, after just 9 months of operation, AngoNIX already had 11 active members (ISPs), a traffic peak of 4.4 Gbps, and average daily traffic of 3.1 Gbps. AngoNIX is an Internet Exchange Point (IXP) between However, not all Angola Cables shareholders were Internet Service Providers (ISP) and digital content linked to the platform. providers in the domestic market. This ensures the impartial routing of domestic traffic between the various players in the domestic digital market. AngoNIX allows domestic IP traffic to be exchanged within the country, with huge advantages in terms of cost and quality of service. AngoNIX serves as an Internet usage level barometer for international CDNs. As domestic usage grows, Establishment of the AC – international operators become more interested in De-CIX creating links, which significantly improves local partnership Internet quality. In turn, the presence of international (Date) CDNs in our network attracts regional operators.
Official presentation December 2015 of the project Entry Annual objectives exceeded in into service terms of number of active members and volume of traffic
42 Annual Report 2015
Relevant Events
WACS CABLE CUT On 1 June 2015, a fault was detected in the WACS Angola Cables sourced divers to find the exact location cable, with the initial diagnostic indicating a sharp of the electrical fault and inspect the state of the voltage fluctuation in the Sangano power feed cable. The conclusion was that the fault lay equipment (PFE), from around 132,000 to 42,000 approximately 2.7 km from the BMH and 5.2 km from volts. Tests confirmed optical continuity between the the Sangano station. The company's engineers played station and the first repeater in the S1D segment an active role in the inspection and gathered clear (Sangano segment), indicating optical fibre integrity. proof (film) of the damage to the cable's protection. Tests were carried out with support from other The visual inspection indicated the issue stemmed stations and coordination from the WACS system's from friction between the cable and the rocky seabed, primary NOC (P-NOC), confirming a fault in the which had damaged the metal sheath and armour. electrical insulation between the Sangano station and Since it was a shallow area, the repair vessel could not the first repeater. work alone due to its draught, meaning Angola Cables had to source an available support vessel in the region. On 28 June, the cable broke completely, totally disrupting service. The delay in concluding an agreement with the support vessel “Greta K”, which was still carrying out other activities in Pointe-Noire, and obtaining the operating licenses for the two ships, delayed the departure of the repair vessel “CS Leon Thevenin”, which finally set off on 10 July. On 13 July, a restoration solution was implemented by SAT-3 as far as South Africa, where traffic was re- directed back to the WACS. The provisional 10 Gbps connection between AngoNAP and the SAT-3 station in Cacuaco was provided by UNITEL. The repair was carried out between 17-23 July using In order to fix the issue, the P-NOC was requested to the two vessels and a team of divers. The cable was power the S1D segment via the Pointe-Noire PFE replaced at the section damaged by the friction with (Congo), yet this had been out of service for two the rocks and the original trajectory was altered to months and the segment in question was powered by reduce the risk of another cut. the Yzafontein PFE (South Africa). Yzafontein could not This serious incident alerted Angola Cables to the need simultaneously power the Pointe-Noire and Sangano for a permanently available restoration solution and segments. Faced with a major risk of a cut in traffic, regular cable inspections in shallow waters. These Angola Cables requested that the WACS consortium's inspections will demonstrate the usefulness of Operation and Maintenance Committee (COM) give reinforcing cable protection by means of articulated priority to the Sangano segment, considering its pipes or by fixing the cable to the seabed. greater volume of traffic compared with the Pointe- Noire segment. The lack of operational procedures for prioritising Sangano rendered this solution non-viable and the COM quickly arranged for a ship with all the necessary equipment to go and repair the cable.
43 Annual Report 2015
Commercial
MAIN OPTIMISATION OF COMMERCIAL OPERATIONS ACHIEVEMENTS As part of the Sales Force Optimisation Programme, an operational plan was implemented to transform COMMERCIAL OBJECTIVES the commercial department, allowing annual In 2015, there was a significant change in the objectives to be met and improving customer service. performance of the Angola Cables commercial Based on four specific areas (Processes, Organisation, department, with marked improvements on previous Human Resources, and Systems), a series of years as regards the opportunities identified, initiatives were implemented, namely market proposals developed, and agreements signed. analyses, commercial team restructuring, and the The total revenue envisaged in the annual budget definition of processes. The overarching objective was exceeded by 13%, with the Data Centre service was to systematise operations and boost commercial worthy of particular mention since it doubled the activity. previous year's turnover. Turnover increased 65% on the previous year and the total value of agreements concluded in 2015 increased by 230% compared with 2014. Turnover ANGONIX from non-shareholder customers increased 151%, which corresponded to 47% of the total turnover for AngoNIX entered into service in March and, up to the the year. In 2015, 20% of turnover came from outside end of the year, the defined objectives were the domestic market. exceeded, with respect to the number of active members in particular. In summary, 2015 was a year of major commercial endeavour, which has allowed Angola Cables to This service placed Angola Cables among the major establish a solid customer base and increase its share international IXPs and is key to the strategy of in the domestic and international markets. creating a telecommunications hub in Angola. At the end of 2015, AngoNIX recorded substantial growth in the volume of traffic and a rapid trend towards becoming one of the three largest African IXPs.
44 Annual Report 2015
Commercial
PRODUCT MANAGEMENT CUSTOMER SATISFACTION In the second half of 2015, management of the At the end of the first half of the year a satisfaction service offer was divided by product and the new survey was conducted, with 24 customers organisational structure began operation. responding. The results were mainly positive, particularly considering it was conducted after the WACS cable cut. Based on the results of the survey, Marketing an improvement plan was implemented under the direction of the post-sales department.
Circuit Services and At the end of the year a second survey was Angonix, IP, and Content Services Data Centre conducted, which received a response from 30 CDN Management Management Management customers and showed an increase in overall customer satisfaction.
In order to create a complete and structured Response rate Overall satisfaction overview of the services offered by Angola Cables 1st survey and ensure the internal uniformity of commercial 75% information, two groups of documents were developed: background information explaining the company's service offer and technical specifications. 2nd survey 45% 79% The documents describe the services from different 30% perspectives, including technical characteristics, available capacity, and prices.
1º1st Semestre half 2015 2015 2º Semestre2nd half 2015 2015 Between the first and second surveys carried out Main Service Management activities during the year, overall customer satisfaction with Service Management Angola Cables's services rose by almost 4%, while there was a significant increase in satisfaction with
Market Analysis Evolutionary Model Service Offer and Communication and Performance all the company departments that have contact with Pricing Branding Analysis customers.
POST-SALES Satisfaction by department [1st and 2nd survey 2015] The Post-Sales department was also restructured in 78% the second half of 2015, focusing its activities on the Financial area four main areas indicated in the diagram below. 81%
83% Customer service Main Post-Sales activities 88%
Post-sales
Customer 78%
Sales support and Customer relationship Customer service Customer satisfaction manager 82% procurement management
69% Technical area 79%
1st half of 2015 2nd half of 2015
45 Annual Report 2015
Commercial
COMMERCIAL PERFORMANCE MAIN ACTIVITY INDICATORS During 2015, 194 commercial opportunities were identified, a 14% increase on 2014. Of the 194 opportunities identified, 59% related to IP Transit and Circuit services, a total of 115 opportunities.
194
115
54 25
CircuitosCircuits IP Data Center Total
Number of proposals per type of service in 2015
46 Annual Report 2015
Commercial
-25% +14% In 2015, 82 new service provision agreements were established, of which more than 70% were 328 concluded with non-shareholder customers. This 246 represents an 82% increase on the previous year, +82% 194 when 45 agreements were concluded. 170 82 82 45
Opportunities Proposals Contracts 31 2014 2015 26 25
Sales Pipeline
Despite the upward trend across all areas of the Circuit IP Transit Circuito Trânsito IP Data Center Total sales pipeline, the significant increase in the Number of contracts signed per service in 2015 number of agreements concluded shows that the lead to contract conversion rate improved The months in which the highest number of substantially, with an average of 2.75 proposals required to conclude an agreement. agreements were concluded were February and December, with 12 and 11 agreements respectively. 82 48% 27% 100%
115
12 8 9 10 11 54 7 5 5 3 4 4 4 26 31 25 25 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Number of contracts signed in 2015 These results reflect the performance of the CircuitCircuits IP Transit Data Center Proposals Contracts commercial team in concluding and renewing
agreements and increasing sales volume. This Lead to contract conversion per service in 2015 performance is not only the result of developing Despite the positive results in terms of the employees' sales skills, but also Angola Cables's agreement conclusion rate in the Data Centre, growing visibility and renown, itself a result of the there continued to be intense competition in the quality service offer. other areas, requiring increased sales efforts.
47 Annual Report 2015
Commercial
VALUE OF SALES In 2015, the total value of concluded contracts was Akz 7.166 billion, triple the value of sales in The total value of sales derived mainly from the 2014. The end of the shareholders' agreement circuits service (77%), followed by the IP Transit marked a new sales phase for Angola Cables, with service (22%). The Data Centre service continues new agreements being negotiated, which to account for a small percentage of revenue (1%) contributed towards an increase in shareholder sales. Despite increased sales efforts and the due to the fact that it is a lower value type of greater number of contracts concluded, there has service. been an increase in lower value service agreements and a fall in the price of international 1,5% circuits. 22%
7.166 77% 5.788 5.805 5.823 5.056 5.197 4.757 4.853 Circuits IP Transit Data Center 4.410 Distribution of 2015 sales per service 3.408
2.086 As a result of the weighting of shareholder sales, 94% of the total value of sales in 2015 relate to the domestic market, followed by other 366 international markets outside the African continent. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 5,0% 1% Total cumulative sales in 2014 and 2015 (Millions of Akz)
94%
Angola Africa Other markets The significant increase in the total number of concluded agreements had an immediate effect on Distribution of 2015 sales per market revenue forecasts, which also increased dramatically.
4,185 4,048 However, it should be highlighted that in terms of total income from service provision there is less reliance on operators, with the representativeness of the international market remaining constant. 2,756 3,515
805 1,002 519 281 386 708 218 427 186 301 147 2015 2016 2017 2018 2019-2031 Domestic Market – Operators Domestic Market - Others Contracts 2013 Contracts 2014 Contracts 2015 International Market Distribution of revenue from concluded contracts (Millions of Akz)
Distribution of income per market in 2015 and 2014
48 Annual Report 2015 Promotion of the Angola Cables brand
In 2015, the Angola Cables brand promotion strategy was based on two main areas: increasing awareness and business promotion. In order to consolidate the Angola Cables brand in the national and international market, efforts were made to diversify the communication channels with customers and potential customers. The company increased its presence on the web with more social network activity and more prominence in the sector's specialised directories. Awareness was also raised by increasingly effective interaction with the press, which ensured a significant amount of positive news and comments. In order achieve the set goals, participation in the industry's main global events was also crucial, since Brazil was at the centre of communications this boosted commercial dynamism and sales. investment in 2015. The conclusion of the land concession agreement for the construction of the One of the year's main objectives was to promote SACS CLS and the Data Centre in Fortaleza was the SACS, Monet, and Fortaleza Data Centre marked with an event there. In keeping with the projects among the main market players, strategy followed in previous years, the company showcasing the company's capability, strength, and sponsored the Ilhabela Sailing Week Regatta as a sustained ambition. With this in mind, in January, means of promoting the brand in Brazil. Angola Cables participated in the Pacific Telecommunications Council, in Honolulu – Hawaii, A number of initiatives were also undertaken within where it explained the status of the new submarine Angola. The first Angonix promotional event, cable projects. named the “Angonix Peering Workshop”, took place in Luanda and demonstrated the benefits and Angola Cables and its services received extensive functioning of the platform with the aim of international media coverage throughout 2015. The attracting new members. Also in Angola, the company was invited to speak at the Oracle Open company won the award for the best services stand Word conference, in the United States, and took at the International Information and part in another edition of AfricaCom, in Cape Town, Communication Technologies Fair, EXPOTIC 2015. as well as in the International Telecoms Week, in Chicago.
49 Annual Report 2015
Technical
MAIN ACHIEVEMENTS SACS CLS/DC In 2015, there was an improvement in service In July 2015, the land concession agreement was quality, particularly in terms of the activation of new concluded between the Prefecture of Fortaleza and services, the integration of new customers, and the Angola Cables, for an initial period of 35 years, for availability of telecommunications systems (apart the site at Praia do Futuro where the SACS cable from the cut in the WACS cable). landing station and data centre will be constructed. Of the projects carried out in 2015, the following The functional and technical definition of the stand out: installations were carried out in conjunction with the project company ACECO TI. One of the main • Upgrade of WACS; objectives is to ensure quality infrastructure, in accordance with regulations and the most advanced • Development of the MONET submarine cable technologies. project; This phase of the project is expected to conclude in • Monet station in Fortaleza (Monet CLS – Cable the first half of 2016, and will be followed by the Landing Station); construction phase, which is set for completion in • SACS station and Data Centre in Fortaleza (SACS 2017. CLS/DC); Angonix • Angonix; The implementation of AngoNIX was concluded in • PoPs in Lisbon and Cape Verde. the first quarter and the infrastructure entered into service in March 2015. The aim was to rapidly MAIN PROJECTS conquer the domestic market and prepare AngoNIX for a leading position in the African market. WACS capacity increase (Upgrade #1) At the end of 2015, AngoNIX already had 11 active The first WACS technology upgrade was aimed at members, exceeding the goal for the year. quadrupling the installed capacity. The project was completed in September and the new capacity was PoPs in Lisbon and Cape Verde made available to the project's consortium members As part of the plans to expand the Angola Cables in November 2015. Angola Cables quadrupled the network, in 2015 the installation of SDH transmission initial capacity, which will allow the continued equipment for the PoPs in Cape Verde was growth of capacity sales. completed, while installation began for the one in Throughout 2015, Angola Cables assisted with the Lisbon. management of the project and with various The PoP in Lisbon forms part of the Euroring, which is activities, in particular adapting the Sangano station, set for completion in 2016 and is a structural supporting the supplier (Huawei Marine Networks) component of Angola Cables's quality IP Transit offer. with the equipment installation, and the acceptance The Lisbon PoP will be the main entry point into testing. Europe for Internet traffic from Africa. The IP routing equipment for the Lisbon PoP is expected to enter into service in the first half of 2016.
50 Annual Report 2015
Technical
The amount of system downtime fell significantly between TECHNICAL 2014 and 2015, with the exception of the WACS system. The most significant reduction related to the Backhaul system, PERFORMANCE which had suffered frequent faults in previous years but was impressively solid in 2015. MAIN TECHNICAL INDICATORS
The annual availability of the WACS system was 2015 substantially lower than the objective due to the cut in the Sangano segment in June. The IP Transit and Backhaul systems recorded availability of 99.95%, which was higher than the objective. The completion 12 5 of improvements to the infrastructure in the 3rd 2 quarter meant that all 3 systems had 100% availability 0 1 0 in the 4th quarter of 2015. WACS Backhaul IP Transit
49 Objective 99.95% 99.7% 99.9% 100.0% 99.8% 99.1% 2014
13
6 4 2 0
89.5% WACS Backhaul IP Transit
Non-scheduled Scheduled WACS Backhaul IP Transit
2015 2014 System Downtime in 2014 and 2015.
Availability of telecommunications systems since August 2015
The WACS system faults were largely related to the cut in the Sangano segment of the cable. The increase in scheduled WACS system downtime was due to the installation of equipment, as well as other work carried out as part of Upgrade #1, which was completed in September.
51 Annual Report 2015
Technical
Due to the cut in the cable in the Sangano segment, During 2015, 10 new circuits were activated, double WACS was down for 37 days. During most of this the figure for 2014. time, a portion of the traffic was restored by the SAT-3 cable. 3
53,626 2015
7
1 3 2
1 1 1 1
Jul
Oct
Jan Apr
Feb Mar Jun
Sep Dec
Nov
Aug
May Total
0 200 0 385 780 Circuit with Last-Mile Circuit without Last-Mile
Internet Backhaul WACS Monthly Distribution of Circuit Activation in 2015. 2014 25,412
3
2 2
1 1 1 1 1 1
0 0 0 0 0 0 0 0
Jul
Oct
Jan Apr
Feb Mar Jun
Sep Dec
Nov
May Aug 2015 2014 1,932 1,559 0 240 0 Comparison of circuit activations in 2014 and 2015. Internet Backhaul WACS Scheduled Non-scheduled Of the total circuits activated, 70% were circuits with a local access segment (Last Mile). System downtime in 2014 and 2015 (minutes).
52 Annual Report 2015
Technical
In 2015, there was a significant reduction in the The volume of IP traffic grew steadily throughout average activation time for circuits without Last 2015. Mile thanks to the improved efficiency of Angola Cables.
By contrast, the average activation time for circuits 1,896,400 with a local access segment increased slightly compared with the previous year.
1,181,696 900,000 836,096 653,000 2015 420,300 4 382,900 306,586 238,800 135,500 175,600 81,500
2 2
Jul
Oct
Apr
Jan
Jun Feb Mar
Sep Dec
Nov
May Aug 1
IP Traffic – Volume of Traffic (GB) in 2015.
Circuit with Last-Mile Circuit without Last-Mile Mbps 6,141 6,176
2014 5,301 4 4,747 4,066 3
2,630 2,150 1,956 1 1 1,853
663 481 657
Circuit with Last-Mile Circuit without Last-Mile
Jul
Oct
Jan Apr
Jun Feb Mar
Sep Dec
Nov Aug Activation Time at the responsibility of Angola Cables May Activation Time at the responsibility of Third Parties
Average time (days) to activate circuits in 2014 and 2015. IP traffic - Download peaks 95% percentile (Mbps) in 2015
53 Annual Report 2015
Human Talent
HUMAN RESOURCES ANGOLA CABLES POLICY EMPLOYEES People are Angola Cables's most valuable assets. In 2015, the company had a total of 87 employees, which is 7 more than the previous year (8% It is due to its employees that the company is able increase). to ensure a quality service and a lasting relationship with its customers, which is the main source of sustainability. 87 80 8% 29% Angola Cables has a quality and innovative 62 customer service culture. Transparency in 48% relationships and decision-making and the 42 continual development of skills are other distinctive features of the company's culture.
Angola Cables invests in a meticulous recruitment 2012 2013 2014 2015 process, as well as training and development for its human talent. Performance evaluation Number of Angola Cables employees throughout the year is a key feature of staff development, continually promoting alignment Angola Cables is particularly attentive to staff between corporate, departmental, and individual development and retention. The retention rate objectives, as well as individual performance. was 98% in 2015, up 6 percentage points on 2014. The success of Angola Cables depends on the skills The absenteeism rate for the year was 1.81%, up and motivation of its staff and it is for this reason 0.58 percentage points on the previous year. that the company constantly seeks to foster team spirit, the sharing of experiences, and knowledge of the company strategy.
Absenteeism rate 1.81% Customer Service 1.23% Team Spirit
Innovation 2014 2015 Focus on objectives and results Absenteeism Rate Leadership Quality of service Angola Cables Attitude
54 Annual Report 2015
Human Talent
DISTRIBUTION BY FUNCTIONAL AREA DISTRIBUTION BY FUNCTIONAL GROUP
In 2015, the Angola Cables organisational The Angola Cables workforce is divided into four structure continued to be divided into three different functional groups. directorates (Technical; Commercial and Marketing; and Administrative and Financial), three departments (Human Talent; Legal; and 55 Planning and Reporting), and an executive 44 secretariat.
25 2014 2015 17 38 16 14 12 11 33 9 2 1 2
Support Senior Supervisors Directors and 18 17 Technicians and Top 14 13 Specialists Specialists 2013 2014 2015 4 3 4 3 2 2 1 1 Number of Angola Cables employees by Functional Group
In 2015, the largest functional group was senior Department
Human Talent technicians (69%), followed by supervisors and
Department
LegalDepartment
Commercialand Administrationand
FinanceDirectorate specialists (18%). The support group was reduced
ExecutiveSecretariat
Technical Directorate MarketingDirectorate
Planningand Reporting by 25%, while the director group numbers were restored after a fall in the previous year. Number of Angola Cables employees by functional area The operational structure of the company is closely linked to the growth in assets and the The Technical Directorate, made up of 38 business requirements. The Technical Directorate members distributed over 5 units, continues to has the largest number of senior technicians due be the functional area with the most staff, to the overriding need to ensure the expansion making up 44% of the total workforce. and functionality of the telecommunications infrastructure.
55 Annual Report 2015
Human Talent
PROFILE NATIONALITY Angola Cables is a young, skilled organisation that is Angola Cables relies mainly on highly-qualified capable of successfully completing its mission. Angolan staff. Despite being a high-tech enterprise with a need for international experience, the company only had 3 foreign employees at the end AGE of 2015. The most common age range of employees is 25-35 In 2015, all employees at the subsidiary in Brazil years, followed by the 40-50 years range. The were Brazilian. average age of staff is 33, which shows huge development potential. 3
33 26 26 21 12 6 7 9 8 2 4 2 2 1 2 2 80 < 25 25-30 30-35 35-40 40-45 45-50 50-55 >55
2014 2015 National Foreign Distribution of Angola Cables employees by age range, 2015 Distribution of Angola Cables employees by nationality, 2015 GENDER ACADEMIC QUALIFICATIONS The Angola Cables workforce is made up mainly of Due to the skills required by Angola Cables, men (71%), reflecting the technical nature of most recruitment is aimed mainly at graduates. of the operations. In terms of administrative functions, there is more balance between men and women.
83 73
24 6 3 59 Total EnsinoPrimary Superior EnsinoSecondary Médio EnsinoGraduates Básico Education Education
Academic qualifications of Angola Cables staff, 2015
Female Male In 2015, of the 83 Angola Cables employees, 73 (more than 88% of the total) were graduates. The remaining 10 employees had secondary (7.2%) or Distribution of Angola Cables employees by gender, 2015 primary (3.6%) education.
56 Annual Report 2015
Human Talent
TRAINING TECHNOLOGICAL In 2015, the company carried out 32 training ADVANCES activities, amounting to 3,146 hours of training in total. In 2015, Human Resources management showed a clear commitment to change, especially through the The training provided throughout the year was adoption of new information technologies for mainly focused on the specific skills of each area automating tasks and supporting staff development, (81%). The sections that participated in the greatest administrative processes and the integrated number of training activities were the Technical management of human resources. Directorate and the Commercial and Marketing Directorate. Angola Cables invested in a cloud platform that allows performance assessments to be carried out There were also internal training activities related to interactively, transparently, and effectively. The the business, with “What is Angola Cables?” sessions application allows employees to update their aimed at creating more and better Angola Cables progress with objectives at any time or place via the ambassadors. Internet, while assessors are able to monitor progress and carry out evaluations. The technological advances also included the Human Talent automation of recruitment processes, allowing Department candidates to register on the Angola Cables database via the Internet and the company Legal executives to add job posts using the same Department application, which is also available on the cloud. Technical In this way, the company is able to keep abreast of Directorate technological and human resource management Commercial and trends, simultaneously promoting Internet usage Marketing and, as a consequence, one of its lines of business. Directorate Administration Specific Cross-cutting and Finance Directorate
Training provided in 2015 by area and type of training
57 Annual Report 2015
Human Talent
PROMOTION OF EMPLOYMENT TEAM BUILDING In 2015, Angola Cables carried out four promotional In November, there was a meeting on the topic of activities in Angolan universities, with the aim of "Leadership", which was aimed at developing encouraging final-year students to apply for jobs leadership skills and strengthening the cohesion of with the company. the Angola Cables management team. For two days, supervisors, directors, and members of the The events, named “Angola Cables Day”, took Executive Committee participated in intense team building exercises. Together we are stronger. place at the Agostinho Neto University, the Catholic University, the Independent University, and the Higher Institute for Information Technology and Communication. Six finalists from the latter were recruited and now form part of the Angola Cables team. ANNUAL MEETING On 29 April, there was an annual Angola Cables meeting in Luanda aimed at involving all staff in the building of a successful future for the company. At this meeting there was a presentation of the company's vision and strategy, an evaluation of the previous year, and the main objectives for 2015, as well as the status of each of the ongoing structural projects. COMPANY QUIZ ANNUAL PARTY In order to foster internal communication, To celebrate the year's results and the 3rd anniversary of commercial operations, the “Annual knowledge sharing, teamwork, and competitive Party” was organised on 5 December, which was spirit, during October and November there was a attended by all staff in an informal setting. The CEO competition among all the company departments, highlighted the results, thanked everybody for their which was called the "Company QUIZ". contribution, and presented a preview of the challenges for 2016. There was a series of more than 100 questions, all directly or indirectly related to Angola Cables and its business, which were distributed at the beginning of the week and collected from each department at the end of the week. The initiative generated the anticipated healthy competition among the various teams and, above all, significantly increased general knowledge about the company, its environment, and its business in a playful manner. The winner, with the most correct answers, was the NOC team.
58 Annual Report 2015
Sustainability
SUSTAINABILITY CONSERVATION OF BIODIVERSITY The company's sustainability policy includes applying Our overriding responsibility is to provide services with environmentally friendly solutions when constructing the quality expected by our customers, in an efficient its infrastructures, such as the efficient use of energy manner, thereby contributing to the success of our and water, the use of non-polluting materials, and the shareholders and customers and the socio-economic development of the community in which we are present, selection of (underwater and land) cable routes with namely by promoting access to communications and, in the least environmental impact. particular, the Internet. The activities and economic development of the However, we understand that social responsibility is also coastal region present one of the main threats to sea an important factor in our success. Sustainable turtles, since they affect nesting sites and impede development is a cornerstone of our business strategy. reproduction. Since the species is now severely We constantly take care to ensure that our actions are endangered, Angola Cables sponsors the Kitabanga beneficial to our community and, generally, contribute to Project, promoted by the Faculty of Sciences at the the legacy of a better world for future generations. Agostinho Neto University, which is dedicated to raising awareness and protecting sea turtles along the As well as actively participating in charitable projects and Angolan coast. programmes for the protection of endangered species, Angola Cables encourages innovation in the sector and In addition, Angola Cables has raised awareness among promotes the dissemination of knowledge and skilled local communities, in particular fishermen in the training, thereby contributing to the sustainable Sangano region, highlighting the importance to the environmental and economic development of the community of preserving native species. surrounding area. MONET AND SACS AND THE OUR PEOPLE ARE OUR FUTURE PRESERVATION OF PROTECTED Angola Cables is committed to providing skilled training SPECIES to Angolan staff. The recruitment policy seeks to attract young talent from the best universities in the country, The Monet and SACS projects are subject to strict educated in the company's various areas of activity. international regulations with respect to environmental conservation and the granting of installation licenses by In addition to professional training, in 2015 the company the relevant authorities in Angola, Brazil, and the USA. continued the training programme on environmental conservation and work ethics. For example, the SACS cable route is being analysed to avoid any impact on the habitat and migration routes Concern with staff well-being was reflected in the of leatherback and olive ridley turtles on the beach in application of international health and safety best practices, making the work environment more pleasant Sangano. and comfortable. CREATING VALUE FOR ANGOLA Angola Cables projects an international image of an enterprising, innovative, transparent, and responsible Angolan company. In addition, the company creates value for the Angolan trade balance by exporting services.
59 Financial Analysis 61 Annual Report 2015
Financial Results
ECONOMIC ANALYSIS
Million Kwanzas 2015 ∆ 2014 ∆ 2013 Operating revenues 4,329.32 65% 2,622.61 36% 1,925.21 Operating expenses before depreciations (3,017.93) 27% (2,379.12) 21% (1,968.87) EBITDA 1,311.40 439% 243.49 558% (43.66) Depreciations (481.28) 10% (435.72) 14% (383.45) Operating Income 830.11 432% (192.22) 55% (427.11) EBITDA Margin 30% 21 p.p. 9% 11 p.p. -2%
During the 2015 financial year, Angola Cables's Operating income totalled Akz 830.11 million and third year of commercial activity, an operating was positive for the first time since the company revenue of Akz 4,329.32 million was recorded, began operations. deriving from the provision of services to customers and the WACS consortium. This result is significant considering the high fixed costs associated with the main business and the The 65% increase in revenue compared to the deceleration in domestic market growth. The result previous year includes the positive effect of sales in demonstrates a strong focus on operational USD, or indexed to the USD, in a year in which the efficiency. devaluation of the Kwanza against the USD was 24%. Depreciations increased 10%, mainly due to the completion of the WACS Upgrade #1 project and Operating expenses before depreciations rose 27% other technological investments. compared to 2014. In 2015, inflation doubled in Angola compared with 2014, to almost 14%, which means the real increase in costs for the organic growth of the company was 13%. The combined effect of boosting income and containing costs more than quintupled EBITDA, which stood at 1,311.28 million Akz. The EBITDA margin was 30%, up 21 percentage points on the previous year.
62 Annual Report 2015
Financial Results
SUMMARY
Million Kwanzas 2015 ∆ 2014 ∆ 2013 Operating revenues 4,329.32 65% 2,622.61 36% 1,925.21 Operating expenses before depreciations (3,017.93) 27% (2,379.12) 21% (1,968.87) Depreciations (481.28) 10% (435.72) 14% (383.45) Operating income 830.11 432% (192.22) 55% (427.11) Financial income 14.57 -87% 110.22 161% 42.18 Other non-operating income (294.00) -157% (114.49) -75% (65.38) Net income for the year 550.69 280% (196.50) 56% (450.32)
In 2015, the company made a net profit of Akz 551 Other non-operating income was negative (loss), due million. This was the first year that the company mainly to the adjustment of costs from previous years made a net profit since the start of trading. and the creation of the provision for tax costs relating to the WACS system and Monet project following The financial income were down 87% compared to submission of a request to the competent authorities. the previous year, mainly due to changes in the way interest on shareholder loans is recorded.
63 Annual Report 2015
Financial Results
OPERATING REVENUE
Million Kwanzas 2015 ∆ 2014
Domestic market revenues 3,430.88 71% 2,011.32 International market revenues 783.57 49% 526.62 Landing Service Provider (Sangano) 114.87 36% 84.67 Operating revenues 4,329.32 65% 2,622.61
Most of the company's revenue is in USD or indexed The sale of international transmission capacity to the USD. Therefore, the 24% devaluation of the (circuits) in the WACS system continues to be the Akz against the USD in 2015 had a positive effect on company's main source of revenue, corresponding to income in Akz. The annual increase in revenue in 79% of total revenue. The IP Transit service USD was 43%. recorded strong growth in 2015, amounting to 14% of the total. The Data Centre services, in particular Revenue from the domestic market grew 71% thanks Colocation, continued to have a minor impact on to increased sales of circuits and IP Transit, resulting revenue due to the limitations on available space in from an expanded customer base. AngoNAP. Revenue from outside the domestic market Backhaul is the fibre optic infrastructure between amounted to 18% of the total, down 2 percentage the Sangano station and the AngoNAP connection points on the previous year. The weighting of centre, in which Angola Cables also leases circuits. revenue from the international market should increase significantly in the coming years.
4% 1% 1% 1%
Proveitos 14% 4,329.32
65% 4,329.32 2,622.61 36% 1,925.21 79%
2013 2014 2015 WACS TrânsitoIP Transit IP Backhaul Colocation Last Mile OutrosOthers Evolution of revenues 2013-2015 Distribution of revenues in 2015
64 Annual Report 2015
Financial Results
OPERATING EXPENSES
Million Kwanzas 2015 ∆ 2014 Staff expenses (920.76) 73% (533.59) Depreciations (481.28) 10% (435.72) Other operating expenses and losses (2,097.17) 14% (1,845.53) Operating expenses (3,499.21) 24% (2,814.83)
In 2015, operating expenses rose by 24% compared to Depreciations totalled Akz 481.28 million in 2015, up the previous year, totalling Akz 3,499 million. 10% on the previous year. This increase mainly relates to the completion of the WACS Upgrade #1 project and The largest rise related to staff expenses, due to the investment in telecommunications infrastructure. increase in employees (9%) and the first salary update since 2012. The weighting of staff expenses against total operating expenses before depreciations rose by Items (Million Kwanzas) 2015 2014 31%, up 8 percentage points on the previous year. Tangible assets Buildings and other constructions 322.88 330.30 Administrative equipment 40.28 25.66 Basic equipment 54.04 29.36 Staff costs 2015 2014 % Million Kwanzas Loading and transportation equipment 31.84 38.74 Remuneration - staff 598.48 351.14 66% Land and natural resources 3.67 3.67 Other tangible assets 0.36 0.21 Remuneration - statutory bodies 149.44 118.84 22% Intangible assets Training 19.16 29.95 6% Other intangible assets 28.20 7.77 Remuneration-related expenses 38.13 26.63 5% Total 481.28 435.72 Work accident and disease insurance 8.27 5.99 1% Other staff related expenses 107.28 1.05 0% Total 920.76 533.59 100%
65 Annual Report 2015
Financial Results
Other operating expenses and losses grew by 14% overall. However, supplies and third-party services only grew by 10%, below annual inflation. By contrast, the OPERATING INCOME cost of leasing transmission infrastructure from Operating income in 2015 stood at Akz 830.11 million. domestic operators – backhaul and access circuits (last mile), increased 27%. An operating profit was recorded for the first time since commercial operations began, continuing the trend of sustained improvement since 2012. This Other operating expenses and losses 2015 ∆ 2014 result is especially significant considering the (Million Kwanzas) unfavourable macroeconomic situation in 2015 and Subcontracts 348.03 27% 273.09 the weighting of the domestic market on the Supplies and third-party 1,705.83 10% 1,555.86 company's results. services Taxes 43.30 161% 16.58 830.11 2,097.17 14% 1,845.53
Supplies and third-party services are detailed below.
2012 2013 2014 2015 (192.22) (427.11) Items (Million Kwanzas) 2015 2014 (690.43)
Evolution of Operating Income 2012-2015 Fees 628.11 541.18 Maintenance and repair 342.49 287.11 Travelling and subsistence allowances 139.86 145.51 Rents and leases 114.28 92.82 Maintenance and repair materials 78.81 0.29 Other services - INACOM licenses 72.29 71.56 Advertising and publicity 71.31 114.51 Technical support 64.57 106.31 Communication 40.45 73.96 Fuel and other fluids 37.80 28.52 Monitoring and security services 34.42 31.83 Commission fees 22.68 12.72 Cleaning, hygiene and comfort 15.24 10.91 Insurance 13.07 9.34 Office materials 8.71 6.63 Water 7.68 6.88 Representation expenses 3.56 4.58 Fast-wearing tools and appliances 3.49 8.22 Books and technical documentation 1.83 0.54 Legal services 1.07 2.38 Electricity 0.60 0.10 Protection, security, and comfort materials 0.37 - Other supplies 3.15 - Total 1,705.83 1,555.86
66 Annual Report 2015
Financial Results
FINANCIAL INCOME NET INCOME
The financial income amounted to Akz 14.57 million in 2015. 110.22 Net income in 2015 stood at Akz 550.69 million. As with operating income, net income was positive for the first time since the company began trading, confirming the upward trend recorded in previous years and the value 42.18 creation prospects. 14.57 The net income in 2015 benefited from Industrial Tax (corporate income tax) credits relating to the losses 2012 2013 2014 2015 recorded in previous years.
(66.29)
380% Evolution of Financial income 2012-2015
2012 2013 2014 2015
56% The financial income balances exchange rate variations,
interest from investments, interest on shareholder loans 43% advances, and bank charges. The difference in the financial income compared to the previous year can be largely explained by the inclusion of interest on shareholder loans under this heading, which was previously recorded differently. This interest was partially (81%) offset by the interest obtained from financial investments.
67.60 43.78
(96.81)
Shareholder loans Banking services Exchange rate variations
Composition of Financial income in 2015
67 Annual Report 2015
Financial Results
CAPITAL STRUCTURE At 31 December 2015, the capital structure of Angola Cables comprised 68% of equity and 32% of debt. Compared with 2014, there was a 1 percentage point increase in the weighting of equity on the capital structure.
Million Kwanzas 2015 ∆ 2014 EQUITY 11,624.14 5% 11,063.09 LIABILITIES 5,545.36 0% 5,571.98 TOTAL 17,169.50 3% 16,635.07
16,635.07 17,169.50
12,052.11 10,528.57 5,571.98 5,545.36 2,559.71 4,533.56 11,063.09 11,624.14 7,968.86 7,518.54
2012 2013 2014 2015
CapitalEquity Próprio PassivoDebt Total Evolution of the capital structure 2012-2015
COMPOSITION OF EQUITY
There was a 5% increase in equity compared with the previous year thanks to the net profit for the year and the injection of supplementary capital from a shareholder in relation to investment in the WACS system.
Million Kwanzas 2015 ∆ 2014 Share Capital 13,141.41 0% 13,131.05 Retained earnings (2,067.95) -10% (1,871.46) Net income for the year 550.69 280% (196.50) TOTAL EQUITY 11,624.14 5% 11,063.00
68 Annual Report 2015
Financial Results
CAPITAL STRUCTURE COMPOSITION OF LIABILITIES
At the end of the 2015 financial year, Angola Cables's liabilities totalled Akz 5,545.36 million, down Akz 26.62 million on the previous year.
LIABILITIES (Million Kwanzas) 2015 ∆ 2014 Medium- and long-term loans 3,710.12 12% 3,320.37 Provisions for other risks and charges 251.21 -9% 275.90 Accounts payable 988.56 -30% 1,413.25 Other current liabilities 595.47 6% 562.45 TOTAL LIABILITIES 5,545.36 0% 5,571.98
The amount of medium and long-term loans increased in return for a reduction in provisions for other risks and charges, by transferring the accrued interest on shareholder loans from previous years, plus interest accrued in 2015, from the latter item to the former.
There was a 30% reduction in accounts payable as a result of the company's efforts to settle debts with suppliers as soon as it began to recover from the heavy constraints on liquidity experienced in the second half of 2014 and the first quarter of 2015. Other current liabilities include operating licenses payable to INACOM in accordance with a payment plan that is currently under negotiation, payments due to suppliers for services provided but not invoiced in 2015, and a provision for variable pay to staff linked to the individual annual performance appraisal.
69 Annual Report 2015
Financial Results
COMPOSITION OF ASSETS Angola Cables's assets at the end of 2015 amounted to Akz 17,170 million, an increase of 3% compared to 2014. Their composition was as follows:
ASSETS 2015 ∆ 2014 Non-current assets Tangible assets 11,648.07 12% 10,397.48 Intangible assets 180.42 110% 86.12 Investments in subsidiaries and associates 101.48 - Other non-current assets - 73.27 TOTAL NON-CURRENT ASSETS 11,929.98 13% 10,556.86 Current assets Accounts receivable 2,712.59 20% 2,263.07 Cash and cash equivalents 2,483.92 -33% 3,711.98 Other current assets 43.00 -58% 103.16 TOTAL CURRENT ASSETS 5,239.52 -14% 6,078.21 TOTAL ASSETS 17,169.50 3% 16,635.07
There was a 12% increase in tangible assets, mainly due to continued investment in the Monet and SACS projects, the start of the cable landing station project in Fortaleza, the WACS Upgrade #1, Backhaul Phase 2 (increased capacity and availability), AngoNIX, and IP Transit projects, outfitting the new facilities in the Dolce Vita building (NOC and Technical Directorate), and the purchase of a service vehicle.
There was a 110% increase in intangible assets, with the SAP system upgrade (financial and asset management and salary processing) and the customisation of the human resources management application Oracle Fusion HCM (recruitment, assessment, and development).
Investment in subsidiaries and associates reflects the capitalisation of the Brazilian subsidiary Angola Cables Holding Ltda.
16,635 17,169
12,052 10,529 6,078 5,240 1,883 2,909 11,930 8,645 9,143 10,557
2012 2013 2014 2015
ActivosNon-current Não Correntesassets ActivosCurrent Correntesassets Total
Evolution of Assets 2012-2015
70 Annual Report 2015
Financial Results
NATURE OF ASSETS Operating assets classed as tangible assets are recorded as indicated in the diagram below. The diagram below shows the breakdown of assets and the relative weighting of each heading.
Buildings and other constructions 7,270.98 0%
Basic equipment 428.48 14%
Office equipment 191.59
16% 17,169.50 Land and natural resources 173.08 Loading and transportation 1% 39.89 1% 68% equipment
Other Tangible Assets 3.96
Breakdown of Tangible Assets TangibleImobilizaçoesassets corpóreas ImobilizaçõesIntangible assets incorpóreas InvestmentsInvestimentosin subsi subsid.. and eassoc assoc.. ContasAccounts a receberreceivable DisponibilidadesCash and Cash Equivalents OutrosOther current activosassets correntes Most of the construction in progress, amounting to Akz 2,849 million, relates to the Monet cable, whose construction began in the 4th quarter of 2014. Breakdown of Assets in 2015 Construction for the SACS and Fortaleza CLS projects relates to construction phase preparatory works. TANGIBLE ASSETS Most (70%) of the value under the tangible assets heading relates to operating assets. The remaining 2% 30% relates to ongoing investment projects (construction in progress). 16%
3,540.10
80%
30% Monet SACS Angonap Backhaul 11,648.07 Landing Station - Fortaleza Others
70%
Breakdown of construction in progress
TangibleImobilizaçõesassets corpóreas ImobilizadoConstruction emin cursoprogress
Breakdown of Tangible Assets in 2015
71 Annual Report 2015
Financial Indicators
IMMEDIATE LIQUIDITY CURRENT LIQUIDITY
1.9 1.9 3.4 3.3 - 0.9 - 0.3 0.3 1.6 3.1 2.7 + 0.9 0.9 + 0.9 2.5 Current liquidity 1.0 excluding the 0.8 Current effect of SACS liquidity and Monet excluding the (Assets and effect of SACS Liabilities) and Monet (Assets and 2012 2013 2014 2015 Liabilities) 2012 2013 2014 2015 The immediate liquidity ratio reflects the company's The current liquidity ratio reflects the extent to which ability to meet its short-term obligations with cash and current liabilities are covered by current assets. At the cash equivalents. At the end of 2015, 49% of cash and end of 2015, the current liquidity ratio of Angola Cables cash equivalents, to the amount of Akz 1,208 million, was 3.3. Excluding the effect of the financing of the new were reserved exclusively for investment costs relating to submarine cables, as explained under the immediate the SACS and Monet projects. After removing the funds liquidity ratio, the current liquidity ratio at the end of the and costs relating to these projects from current assets year was 2.5. and liabilities, the immediate liquidity ratio at the end of 2015 was 0.8.
FINANCIAL DEBT AUTONOMY
0.76 0.38 -0.05 - 0.13 +0.04 +0.01 -0.01 0.67 0.68 0.33 0.52 + 0.14 0.32
0.24
2012 2013 2014 2015 2012 2013 2014 2015
The financial autonomy ratio measures the The debt ratio shows the ratio between liabilities and proportion of assets that are financed with equity. assets, reflecting the degree to which the operation is At the end of 2015, the financial autonomy of financed by borrowed capital. At the end of 2015, this Angola Cables was 68%. ratio was 0.32, down 1 percentage point on the previous year.
72 73 Financial Statements 75 Annual Report 2015
Balance Sheet
FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (AMOUNTS EXPRESSED IN KWANZAS)
Notes 2015 2014 ASSETS Non-current assets Tangible assets 4 11,648,072,851 10,397,476,838 Intangible assets 5 180,422,574 86,119,699 Investments in subsidiaries and associates 6 101,482,600 - Other non-current assets 9 - 73,267,388 TOTAL NON-CURRENT ASSET 11,929,978,025 10,556,863,925
Current assets Accounts receivable 9 2,712,592,293 2,263,067,504 Cash and cash equivalents 10 2,483,923,270 3,711,982,835 Other current assets 11 43,004,139 103,156,536 TOTAL CURRENT ASSETS 5,239,519,702 6,078,206,875
TOTAL ASSETS 17,169,497,728 16,635,070,800
EQUITY AND LIABILITIES Equity Share capital 12 13,141,406,741 13,131,046,741 Retained earnings 14 (2,067,952,487) (1,871,456,801) Net income for the year 550,687,492 (196,495,686) TOTAL EQUITY 11,624,141,746 11,063,094,254
Non current liabilities Medium- and long-term loans 15 3,710,116,790 3,320,372,467 Provisions for other risks and charges 18 251,206,242 275,902,303 TOTAL NON-CURRENT LIABILITIES 3,961,323,032 3,596,274,770
Current liabilities Accounts payable 19 988,564,212 1,413,248,396 Other current liabilities 21 595,468,739 562,453,380 TOTAL CURRENT LIABILITIES 1,584,032,951 1,975,701,776
TOTAL EQUITY AND LIABILITIES 17,169,497,728 16,635,070,800
76 Annual Report 2015
Income Statement
FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (AMOUNTS EXPRESSED IN KWANZAS)
Notes 2015 2014 Service Provision 23 4,214,450,338 2,537,938,057 Other operating revenues and gains 24 114,871,278 84,672,390 4,329,321,616 2,622,610,447 Staff expenses 28 (920,757,358) (533,591,972) Depreciations 29 (481,280,778) (435,716,878) Other operating expenses and losses 30 (2,097,168,930) (1,845,525,807) (3,499,207,065) (2,814,834,657)
OPERATING INCOME 830,114,551 (192,224,210)
Financial income 31 14,569,873 110,221,294 Other non-operating income 33 (293,996,932) (114,492,769) INCOME BEFORE TAXES 550,687,492 (196,495,686)
NET INCOME FOR THE YEAR 550,687,492 (196,495,686)
77 Annual Report 2015
Cash Flow Statement
FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (AMOUNTS EXPRESSED IN KWANZAS)
Notes 2015 2014 Cash flow from operating activities Cash receipts from customers 23 3,805,757,074 2,266,406,740 Cash payments to suppliers and employees 30 (3,741,444,665) (1,988,511,160) CASH GENERATED BY OPERATIONS 64,312,410 277,895,580 Tax on profits 6,107,314 - Other receipts/payments 637,116,709 - NET CASH FROM OPERATING ACTIVITIES 707,536,434 277,895,580
Cash flow from investment activities Receipts from: Tangible assets 4 - 67,805,100 Payments relating to: Tangible assets 4 (1,703,674,085) (1,396,214,038) Intangible assets 5 (122,505,581) (66,004,465) Financial investments 6 (101,482,600) - NET CASH USED IN INVESTMENT ACTIVITIES (1,927,662,266) (1,394,413,403)
Cash flow from financing activities Receipts from: Capital increases, supplementary capital contributions, and premiums 15 10,360,000 3,880,800,000 Interest and similar income received 31 78,515,357 9,955,014 Payments relating to: Interest and similar expenditure paid 31 (96,809,088) (113,650,132) NET CASH USED IN FINANCING ACTIVITIES (7,933,732) 3,777,104,882
NET INCREASE IN CASH AND CASH EQUIVALENTS (1,228,059,565) 2,660,587,059 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 3,711,982,835 1,051,395,776 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 2,483,923,270 3,711,982,835
78 Annual Report 2015
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2015 (AMOUNTS EXPRESSED IN KWANZAS)
Foreword 1 ACTIVITY 2 ACCOUNTING POLICIES ADOPTED IN THE PREPARATION OF THE FINANCIAL STATEMENTS 3 CHANGES TO ACCOUNTING POLICIES Notes to the balance sheet 4 TANGIBLE ASSETS 5 INTANGIBLE ASSETS 6 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES 8 STOCKS 9 OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE 10 CASH AND CASH EQUIVALENTS 11 OTHER CURRENT ASSETS 12 SHARE CAPITAL 14 RETAINED EARNINGS 15 MEDIUM AND LONG-TERM LOANS 18 PROVISIONS FOR OTHER RISKS AND CHARGES 19 ACCOUNTS PAYABLE 21 OTHER CURRENT LIABILITIES Notes to the income statement 23 PROVISION OF SERVICES 24 OTHER OPERATING REVENUES AND GAINS 28 STAFF EXPENSES 29 DEPRECIATIONS 30 OTHER OPERATING EXPENSES AND LOSSES 31 FINANCIAL INCOME 33 OTHER NON-OPERATING INCOME 35 INCOME TAX Other notes relating to the financial position and operating results 36 COMMITMENTS NOT REFLECTED UNDER LIABILITIES 38 EVENTS AFTER THE BALANCE SHEET DATE 40 TRANSACTIONS WITH RELATED ENTITIES
79 Annual Report 2015
Notes to the Financial Statements
Foreword 2. ACCOUNTING POLICIES ADOPTED IN THE PREPARATION OF THE 1. ACTIVITY FINANCIAL STATEMENTS 1.1 BRIEF DESCRIPTION OF THE COMPANY 2.1 BASIS FOR PRESENTING THE FINANCIAL STATEMENTS Angola Cables SA (hereinafter “Angola Cables” or “Company”) is a public limited company incorporated The financial statements were prepared in accordance by a public deed dated 4 June 2009, in Luanda, at the with the General Accounting Plan (GAP), approved by Notary Office of the GUE (Guiché Único da Empresa). Decree Law no. 82/01 of 16 November, which applies to commercial companies and public companies that operate The company's corporate object consists in being a in Angola or other countries and have their headquarters participating member of the international consortium in Angola. for the construction, operation, and maintenance of the WACS project, the commercial exploitation of The financial statements, which include the balance sheet, income statements by nature, and the notes to the telecommunications through submarine cables and accounts, were approved by the company's Board of access to neighbouring countries, and all connected Directors on 30 March 2016. They are in Kwanzas (AOA) activities. and were drawn up in accordance with the principles of The company is at the investment stage for two new continuity and accrual in which items are recognized as assets, liabilities, equity, earnings and expenses when they submarine cables, namely SACS and Monet, which are meet the definitions and recognition criteria for these expected to enter service in early 2017. elements in the GAP, in accordance with the qualitative The following stakes are held in the company: 51% by features of relevance, reliability, faithful representation, Angola Telecom, 31% by Unitel, 9% by MS Telecom, 6% economic substance, neutrality, prudence, and completeness in all material aspects. by Movicel, and 3% by Mundo Startel, as set out in note 12. The financial statements were also prepared in accordance with the accounting principles of consistency, materiality, no-netting, and comparability. No derogations were made from the GAP directives. The International Financial Reporting Standards (IFRS) are also used in matters not covered by the GAP or when the former provides more reliable financial information. The notes in the financial statements were numbered in accordance with the official plan. When they were not applicable they were omitted, since they were not relevant to the reading of the financial statements. There are no materially relevant situations on the balance sheet and income statement that are not comparable with the previous year.
80 Annual Report 2015
Notes to the Financial Statements
2.2 VALUATION BASES USED IN PREPARING 2.2.1 RECOGNITION CRITERIA AND THE FINANCIAL STATEMENTS SPECIFIC VALUATION BASES The attached financial statements were prepared on Tangible assets a going concern basis using the company's books and Tangible assets comprise fixed and movable physical accounting records, taking historical cost as a basis. assets used by the Company during its operations, Preparation of financial statements in accordance which are not destined to be sold or transformed with the GAP requires Management to make and have a period of use greater than one year. judgements, estimations and assumptions that The tangible assets acquired are recorded at their influence the application of the accounting policies acquisition price, which includes their purchase price, and reported amounts of assets, liabilities, revenues including import rights and non-reimbursable and expenses. Estimates and associated assumptions purchase taxes, after deducting discounts and are based on experience and other factors reductions, and any costs directly attributable to considered reasonable in context and that form the bringing the asset to the location and condition basis for judgements on the values of assets and necessary for it to be capable of operating in the liabilities that are not readily apparent from other intended manner, deducting accumulated sources. Actual results may differ from the estimates. depreciation and extraordinary amortisations. On the The issues that require a greater level of judgement specific issue of investments made in the WACS or complexity or where assumptions and estimates submarine cable, the value recorded under tangible are considered to be significant are presented in assets corresponds to the Company's share in the note 2.2.2 – Relevant accounting estimates and overall investments made by the consortium. judgements. Subsequent costs are included in the carrying value of the asset or recognised as separate assets, as appropriate, only when future financial benefits are likely to fall on the company and their respective cost can be reliably measured. The main spares and reserve equipment are classified as fixed assets when the Company expects to use them during more than one period. Improvements are only recognised as assets when the expenditure improves the condition of the asset beyond its originally evaluated level of performance, namely: • Modification of an element of an installation in order to prolong its useful life, including an increase in capacity; • Replacement of machine parts to achieve a significant improvement in the quality of production; • Adoption of new production processes that allow a significant reduction in the previously evaluated operating costs.
81 Annual Report 2015
Notes to the Financial Statements
Maintenance and repair costs are recognised as an expense in the financial statements if they have been made to restore or maintain the future economic benefits of the asset. Maintenance and repair costs aimed at restoring the future economic benefits of the asset, the losses on which had already been considered at the initial record date, are capitalised provided that the recorded amount: • Does not exceed the recoverable amount of the asset; • Can be recovered from the future use of the asset. Replacement costs are recognised as an expense in the financial statements because they are aimed at maintaining the future economic benefits of the asset. The company analyses the impairment of tangible assets whenever events and circumstances may indicate that the book value of an asset exceeds its recoverable amount, any impairment being recognised in the income statement, except when the asset has been previously revalued. In this case, the impairment identified is covered by the revaluation reserve in the first instance. Tangible assets in progress reflect fixed assets that are still under construction and are recorded at acquisition cost. They become tangible assets and begin depreciating at the moment the investment projects are available for use. The useful life of a fixed asset is the period during which a depreciating asset is expected to be used by the company. Land does not depreciate since it has an unlimited useful life.
Depreciation in tangible assets are calculated according to the straight-line method, in accordance with the following periods of useful life expected of the assets, according to the law in force in each financial period:
Assets Useful life Buildings and other constructions 25 Basic equipment 4-10 Loading and transportation equipment 3 Administrative equipment 6-10 Other tangible assets 6-10
Losses resulting from the retirement of a tangible fixed asset are determined by the value for which it is recorded (gross value deducted from the corresponding depreciation) and are recognised in the financial statements. Gains or losses arising from the disposal of a tangible fixed asset are determined by the difference between the estimated net income from the disposal and the amount for which the asset is recorded, being recognised as gains or losses in the financial statements, as appropriate.
82 Annual Report 2015
Notes to the Financial Statements
Intangible assets Investments in subsidiaries and associates The company's intangible assets are recorded at Investments in subsidiaries over which the company acquisition price minus the respective accumulated has direct or indirect control are recorded at amortisations and extraordinary amortisations. acquisition cost, minus any possible contingent losses. Control is presumed to exist when the company holds The company assesses for impairment whenever more than half the voting rights or when it has the events and circumstances may indicate that the book power to govern the financial and operating policies value of an asset exceeds its recoverable amount, any of a company or an economic activity in order to impairment being recognised in the income obtain benefits from it, even if it holds less than a 50% statement. The recoverable amount is determined as stake. the greater of the net selling price or its value in use, calculated on the basis of the current value of the Financial investments in associates are recorded at estimated future cash flows obtained from the their acquisition cost. Associates are entities over continued use of the asset and its sale at the end of its which the company has significant influence without useful life. having control over financial and operating policies. The company is deemed to have significant influence Intangible assets are amortised on a straight-line basis when it has the power to exercise more than 20% of for their duration period, which is six years on the associate's voting rights. When the company holds average. less than 20% of the voting rights, it is deemed not to have a significant influence, except when this influence can be clearly demonstrated. Significant influence is usually demonstrated in one or more of the following ways: • Representation on the board of directors or equivalent governing body; • Involvement in defining policies, including involvement in decisions on dividends and other distributions; • The existence of material transactions between the company and the associate; • Interchange of managerial personnel; • Provision of essential technical information.
83 Annual Report 2015
Notes to the Financial Statements
Accounts receivable Receivables include sums due from customers and other debtors, as well as state credits relating to retentions and interim payments. In the first instance, receivables are recognised as the lower amount between their nominal value and their net realisable value and are included on the balance sheet, deducted from any associated provisions for bad debts. Provisions for identified bad debts are charged against income when there is objective evidence that the total amount owed, with respect to the original conditions of the receivables, will not be received. The charge is subsequently reversed if there is a reduction in the estimated losses in a subsequent period. In the case of receivables relating to shareholder customers, the company does not consider aged balances to be an effective credit risk, which is why there are no bad debt provisions for these sums.
Cash and Cash Equivalents Cash and cash equivalents include cash on hand, bank deposits, and other short-term, highly liquid investments with a maturity up to three months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Foreign currency balances and transactions Assets and liabilities in foreign currencies are converted into kwanzas (AOA) at the exchange rate on the balance sheet date. The exchange rates used for converting receivables or payables in foreign currency on the balance sheet date were as follows:
Currency 2015 2014 United States of America Dollars (USD) 134.64 102.86 European Union Euro (EUR) 147.10 125.20 United Kingdom Pounds Sterling (GBP) 199.59 160.00 Brazilian Real (BRL) 40.00 - Exchange rate differences, whether favourable or unfavourable, that arise from fluctuations in the rate between the transaction dates and the collection, payment, and balance sheet dates, are recorded as profits and/or losses in the income statements for the accounting period under the foreign exchange gains/losses item. As for non-monetary items, when a gain or loss is recognised in the results, any exchange rate difference included in this gain or loss is recognised in the results. When a gain or loss is recognised directly in equity, the related foreign exchange rate differences are also recognised in equity.
84 Annual Report 2015
Notes to the Financial Statements
Other current assets Other current liabilities Other current assets include amounts relating to Other current liabilities include payable sums on the sums to allocate to future periods. expense account whose binding document had not yet been received at the balance sheet date; they This account records sums that are to be recognised are valued at historical cost. This item also includes in future periods, in accordance with the accrual income from service provision agreements which, in method. some cases, span different financial periods. In these cases, in accordance with the accrual method, the company defers the income that does not relate to Provisions for other risks and charges the year in question. Provisions are recorded when the company has a present obligation (legal or implicit) resulting from a Revenue past event and it is likely that resources will be used to settle the obligation, the amount of which can be Revenue associated with service provision is reasonably estimated. The amount of provisions recognised in the financial statements according to recorded is a best estimate, on the date of the stage of completion of the service provision on reporting, of the resources necessary for settling the the balance sheet date when the outcome of a obligation. This estimate is determined by taking transaction can be reliably estimated. The outcome into account the risks and uncertainties associated of a transaction can be reliably estimated when all with each obligation. Provisions for other risks and the following conditions are met: charges are subject to revision on an annual basis, depending on the forecast for the respective future responsibilities. Provisions for future operating • The amount of revenue can be reliably losses are not recognised. measured; • It is likely that the economic benefits associated with the transaction will flow into the Company; • The stage of completion of the transaction on Accounts Payable the date of the balance can be reliably Accounts payable include sums owed to suppliers measured; and the state and are valued at the historical cost of • The costs incurred with the transaction and the the transactions. Sums owed in foreign currency are costs to conclude the transaction can be reliably recorded by their value in kwanzas, using the measured. exchange rate in effect on 31 December. Foreign currency transactions are recorded by their value in kwanzas, using the exchange rate in effect on the transaction date.
85 Annual Report 2015
Notes to the Financial Statements
Received interest is recognised in accordance with • Excise Duty: the telecommunications services the accrual method, taking into account the sum provided by the company are subject to excise owed and the effective rate for the period up to duty at a rate of 5% under Executive Decree no. maturity. 41/99, of 10 December, revised by Presidential Legislative Decree no. 7/11, of 30 December; The differences between the amounts received and paid and the corresponding income and expenses • Property Tax: this tax corresponds to 15% of generated in accordance with the accrual method property leases and rentals agreed by the are registered under the "Other current assets" and company, in accordance with Law no. 18/11, of "Other current liabilities" items. 21 April; They are not recognised if there are doubts surrounding the collectability of the product or provision of services. Management is convinced that there are no relevant fiscal responsibilities, real or contingent, that have not been carried and that the tax authorities will make no corrections to the taxable amount of any Taxes material bearing on the company accounts. The company is subject to the following taxes: • Social security: this contribution corresponds to 11% of staff remuneration, 3% of which is the Subsequent events responsibility of the employee; Events after the balance sheet date that provide • Labour income tax (IRT): this tax is retained by additional information about conditions that existed the company when processing employees' wages at the balance sheet date are reflected in the and is calculated based on salary. Under financial statements. If there are materially relevant Executive Decree no. 62/03, of 7 November, 13 events after the balance sheet date, they are variable bands were established, with the disclosed in the annex to the financial statements. maximum rate being 17%; • Stamp Duty: this tax is paid monthly and corresponds to 1% of sales and service provision revenue. The tax payable is calculated based on receipts. • Industrial Tax – Law on construction work taxation: Law 19/14, of 22 October, establishes the tax regime for the settlement and interim payment of Industrial Tax on service provision contracts (6.5%), using the withholding tax system; • Industrial Tax: this tax corresponds to 30% of taxable income, based on financial results, adjusted in accordance with current Angolan tax legislation. The company is required to submit a Declaration of Income from Collections for the Financial Year (Model 1 – Group A), which is subject to review and correction by the Angolan tax authorities for a period of five years.
86 Annual Report 2015
Notes to the Financial Statements
2.2.2 RELEVANT ACCOUNTING ESTIMATES AND Provisions for other risks and charges JUDGEMENTS Sums recognised as provisions are based on In preparing the financial statements, management is management's best estimates of the possible cost of required to make judgements and estimates when meeting the present obligation at the balance sheet date. making decisions regarding certain accounting processes These estimates are based on the assumptions considered which impact on the total reported values of the assets, most appropriate by management. However, in the event liabilities, equity, earnings, expenses, and disclosures at that other assumptions had been considered, a different the balance sheet date. Results and actual effects at the impact on the company's results could have occurred. closing date of transactions may differ from any estimates and judgements made, particularly regarding the effect of actual expenditure and earnings. Impairment of non-current assets
Tangible assets are revised for impairment whenever there are facts or circumstances that indicate that their Estimates are determined by management judgements net value may not be recoverable. The Board of Directors and are based on: is of the understanding that, at 31 December 2015, there • The best information and knowledge of current are no events or circumstances that could lead to the events available at the time, in some cases supported existence of any impairment indicators, in particular with by reports from independent experts; regard to ongoing investment projects, such as the Monet and SACS submarine cables. • The actions that the Company believes it is able to carry out in the future with respect to the situations Taxes on Profits that are subject to estimation. There are a number of transactions and calculations where the final value of tax payable is difficult to assess during a normal business cycle. Other interpretations and The main accounting estimates and judgements used in estimates could lead to a different amount for the tax applying the accounting policies are discussed in this note payable on current profits that is recorded for the year. in order to improve the understanding of how their application affects the reported results and disclosures. A In Angola, the tax authorities are entitled to review the more detailed description of the main accounting policies company's determination of its taxable earnings for a employed by the Company is given in note 2.2.1 of this period of five years. As a result, it is possible that Annex. additional taxes may be assessed as a result of differences in the interpretation of tax laws. If one considers that in some situations there are alternatives to the accounting policies adopted by the The company recognises liabilities for additional tax Company, the reported results might have been different assessments that may arise from reviews by the tax if a different policy had been chosen. The Board of authorities. When the final result of these estimates is Directors believes that the choices made are appropriate different from the values initially recorded, the differences and that the financial statements provide an adequate will have an impact on income tax for the period in which picture of the Company's financial position and results in the discrepancies are identified. all materially relevant respects. The results of the following alternatives analysed are presented only in order to help reader to understand the financial statements and do not intend to suggest that other 3. CHANGES TO ACCOUNTING alternatives may be more appropriate. POLICIES
There have been no changes to the accounting policies adopted by the company in the 2015 financial year compared with the previous year.
87 Annual Report 2015
Notes to the Financial Statements
Notes to the Balance Sheet 4. TANGIBLE ASSETS 4.1 COMPOSITION The composition of the “Tangible assets” item at 31 December 2015 and 2014 was as follows:
Accumulated Items Gross value Net Value depreciation
Period ended in 2015 Land and natural resources 180,419,029 (7,339,078) 173,079,951 Buildings and other constructions 8,304,518,513 (1,033,538,872) 7,270,979,641 Basic equipment 535,604,143 (107,126,307) 428,477,836 Loading and transportation equipment 142,174,450 (102,284,725) 39,889,725 Administrative equipment 262,828,679 (71,242,639) 191,586,041 Other tangible assets 4,750,020 (791,069) 3,958,952 Construction in progress 3,540,100,705 - 3,540,100,705 Total 12,970,395,540 (1,322,322,689) 11,648,072,851
Period ended in 2014 Land and natural resources 180,419,029 (3,669,539) 176,749,490 Buildings and other constructions 8,304,833,705 (710,658,680) 7,594,175,026 Basic equipment 294,103,428 (53,081,531) 241,021,897 Loading and transportation equipment 116,227,050 (70,440,522) 45,786,528 Administrative equipment 249,989,280 (30,962,659) 219,026,621 Other tangible assets 2,077,223 (431,687) 1,645,536 Construction in progress 2,119,071,739 - 2,119,071,739 Total 11,266,721,454 (869,244,617) 10,397,476,838
88 Annual Report 2015
Notes to the Financial Statements
4.2 CHANGES IN GROSS VALUE DURING THE YEAR During the year ended 31 December 2015, the changes in the gross value of tangible assets were as follows:
Items Initial Balance Increases Reclassification Transfers Final balance
Period ended in 2015 Land and natural resources 180,419,029 - - - 180,419,029 Buildings and other constructions 8,304,833,705 - (336,501,902) 336,186,709 8,304,518,512 Basic Equipment 294,103,428 2,298,400 - 239,202,315 535,604,143 Loading and transportation equipment 116,227,050 25,947,400 - - 142,174,450 Administrative equipment 249,989,280 13,332,733 (493,333) - 262,828,679 Other tangible assets 2,077,223 11,639,230 - (8,966,432) 4,750,021 Construction in progress 2,119,071,739 1,987,451,558 - (566,422,592) 3,540,100,705 Total 11,266,721,454 2,040,669,320 (336,995,235) - 12,970,395,540
Period ended in 2014 Land and natural resources 180,419,029 - - - 180,419,029 Buildings and other constructions 8,289,542,487 15,291,218 - - 8,304,833,705 Basic equipment 261,426,582 32,676,846 - - 294,103,428 Loading and transportation equipment 116,227,050 - - - 116,227,050 Administrative equipment 36,067,010 213,922,270 - - 249,989,280 Other tangible assets 2,031,623 45,600 - - 2,077,223 Construction in progress 564,357,035 1,554,714,704 - - 2,119,071,739 Total 9,450,070,816 1,816,650,638 - - 11,266,721,454
89 Annual Report 2015
Notes to the Financial Statements
The "Buildings and other constructions" heading includes the investment in the WACS (West Africa Cable System) submarine fibre optic cable, which entered into service in 2013. This heading also includes investments relating to Angonap and the Sangano station. In 2015, the WACS submarine cable upgrade was carried out. This constitutes the main amount transferred from ongoing investment to firm investment, to the value of 336,187 thousand kwanzas. The 336,502 thousand kwanzas reduction relates to the WACS submarine cable consortium due to sale of shares to Camtel (Cameroon), which joined the consortium by acquiring shares from all the members in proportion to their respective ownership interests. The "Basic equipment" heading relates to investment in transmission equipment, particularly Backhaul, which ensures the land connection between the Sangano terminal station and Angonap in Talatona. In 2015, the main investments relate to the purchase of IP Core Edge equipment and the installation of the corporate network in the Dolce Vita building. The "Loading and transportation equipment" heading relates to the acquisition of transport means required by the company. In 2015, a new vehicle was purchased, bringing the fleet total to 23 vehicles. The "Administrative equipment" heading includes investment in a range of information equipment and office furniture for the Cellwave and Dolce Vita buildings. In 2015, the increases relate to information equipment for the Dolce Vita building (NOC). The composition of the "Construction in Progress" item at 31 December 2015 and 2014 was as follows:
Items 2015 2014 Monet 2,849,184,703 1,443,468,479 SACS 562,661,149 314,254,926 Angonap 19,017,207 234,293,071 WACS - 76,495,731 Backhaul 55,694,729 50,559,531 Landing station - Fortaleza 38,124,524 - Others 15,418,393 - Total 3,540,100,705 2,119,071,738
The investment in the Monet cable relates to the initial design and preparation costs, project management, and the completion of 28% of the project, which is aimed at constructing a fibre optic submarine cable between Brazil and the United States of America.
90 Annual Report 2015
Notes to the Financial Statements
The investment in SACS relates to the initial design and preparation costs, as well as management of the project, which is aimed at constructing a fibre optic submarine cable between Angola and Brazil. The investment in Backhaul relates to the costs incurred in implementing the 2nd phase of this project, aimed at increased capacity and improved availability. The main investments under "others" relate to Angonix equipment (Power Edge, 12,440,263 kwanzas). 4.3 CHANGES IN ACCUMULATED DEPRECIATION DURING THE YEAR
Items Initial balance Supplement Reclassification Transfers Final balance
Period ended in 2015 Land and natural resources 3,669,539 3,669,539 - - 7,339,078 Buildings and other constructions 710,658,680 322,880,192 - - 1,033,538,872 Basic equipment 53,081,531 54,044,776 - - 107,126,307 Loading and transportation equipment 70,440,522 31,844,202 - - 102,284,724 Administrative equipment 30,962,659 40,279,980 - - 71,242,639 Other tangible assets 431,687 359,382 - - 791,069 Total 869,244,618 453,078,071 - - 1,322,322,689
Period ended in 2014 Land and natural resources - 3,669,539 - - 3,669,539 Buildings and other constructions 380,355,651 330,303,029 - - 710,658,680 Basic equipment 23,720,260 29,361,271 - - 53,081,531 Loading and transportation equipment 31,698,174 38,742,348 - - 70,440,522 Administrative equipment 5,301,559 25,661,100 - - 30,962,659 Other tangible assets 223,071 208,616 - - 431,687 Total 441,298,715 427,945,903 - - 869,244,618
The land and natural resources value relates to surface rights for the land at the Sangano station and the Angonap station in Talatona. The depreciation corresponds to the number of years granted under the surface rights.
91 Annual Report 2015
Notes to the Financial Statements
5. INTANGIBLE ASSETS 5.1 COMPOSITION At 31 December 2015 and 2014, the composition of the “Intangible assets” item was as follows:
Accumulated Items Gross value Net Value amortisation
Period ended in 2015 Other intangible assets 153,641,530 (36,929,072) 116,712,458 Construction in progress 63,710,116 - 63,710,116 Total 217,351,647 (36,929,072) 180,422,574
Period ended in 2014 Other intangible assets 94,846,066 (8,726,366) 86,119,699 Total 94,846,066 (8,726,366) 86,119,699
5.2 CHANGES IN GROSS VALUE DURING THE YEAR During the year ended 31 December 2015, the changes in the gross value of intangible assets were as follows:
Items Initial balance Increases Decreases Final balance
Period ended in 2015 Other intangible assets 94,846,066 58,795,465 - 153,641,531 Construction in progress - 63,710,116 - 63,710,116 Total 94,846,066 122,505,581 - 217,351,647
Period ended in 2014 Other intangible assets 3,439,409 91,406,657 - 94,846,066 Total 3,439,409 91,406,657 - 94,846,066 The increases in 2015 relate to the upgrade of SAP software and the Oracle Fusion HCM solution, which were not fully operational at 31 December 2015.
92 Annual Report 2015
Notes to the Financial Statements
5.3 CHANGES IN ACCUMULATED AMORTISATION DURING THE YEAR During the year ended 31 December 2015, the changes in accumulated amortisation were as follows:
Items Initial balance Increases Decreases Final balance
Period ended in 2015 Other intangible assets 8,726,366 28,202,706 - 36,929,072 Total 8,726,366 28,202,706 - 36,929,072
Period ended in 2014 Other intangible assets 955,391 7,770,975 - 8,726,366 Total 955,391 7,770,975 - 8,726,366
6. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES 6.1 COMPOSITION At 31 December 2015 and 2014, the “Investments in subsidiaries and associates” item had the following breakdown:
Initial Final Items Increases Decreases balance balance
Other companies Equity holdings - 101,482,600 - 101,482,600 Total - 101,482,600 - 101,482,600
Associate accounts % Gross Associates Equity Own results sharehol Amounts held amount ding recorded
Angola Cables Holding LTDA Headquarters in Rio de Janeiro 74,782,347 (21,344,605) 99.99% 101,482,600 101,482,600 Total 74,782,347 (21,344,605) 99.99% 101,482,600 101,482,600 Within the context of investment in the Monet and SACS submarine cables, at the end of 2014 the company Angola Cables Holding LTDA. was incorporated. This company has no relevant activity for the current period.
93 Annual Report 2015
Notes to the Financial Statements
9. OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE 9.1 COMPOSITION At 31 December 2015 and 2014, the “Accounts receivable” heading had the following breakdown:
Items Current Non current Total
Period ended in 2015 Customers - current Non-group customers 243,669,141 - 243,669,141 Group customers (Note 40) 2,387,478,855 - 2,387,478,855 State 45,279,401 - 45,279,401 Suppliers – debit balance 36,151,519 - 36,151,519 Other debtors 13,377 - 13,377 Total 2,712,592,293 - 2,712,592,293
Period ended in 2014 Customers - current Non-group customers 123,984,822 - 123,984,822 Group customers (Note 40) 29,828,212 - 29,828,212 State 45,279,401 - 45,279,401 Personnel 4,902,000 - 4,902,000 Suppliers – debit balance 852,000 - 852,000 Other debtors 2,058,221,068 73,267,388 2,131,488,457 Total 2,263,067,504 73,267,388 2,336,334,892
In 2015, the company reclassified balances with shareholder customers, moving them from the “Other Debtors” to the “Customers – current” item. The "State and other public entities" heading relates to customer holdbacks, in accordance with Law 19/14, the value of which is tax deductible for the following five financial years.
9.2 SUPPLIERS, DEBIT BALANCE At 31 December 2015 and 2014, the “Suppliers, debit balance” item essentially relates to “Suppliers – Invoice receipt and checking” and basically involves invoices from suppliers whose service has not yet been provided or from whom Angola Cables has requested clarification.
94 Annual Report 2015
Notes to the Financial Statements
9.3 OTHER DEBTORS, CURRENT At 31 December 2015 and 2014, the "Other debtors" heading comprised the following:
Other debtors - current 2015 2014
Angola Telecom - 1,235,865,934 MS Telcom - 40,280,814 Movicel - 151,078,824 Startel - 85,539,413 Amounts due from the 4th Quarter of 2014 - 545,456,083 Others 13,377 - Total 13,377 2,058,221,068
In 2014, the values under the “Other debtors” item related to income from the shareholder wholesale agreement that was in force between 2012-2014. As previously mentioned, these balances were reclassified in 2015 and included under the “Customers – Current Account” item.
9.4 OTHER DEBTORS, NON-CURRENT At 31 December 2015 and 2014, the "Other debtors – non-current" item comprised the following:
Other debtors - non-current 2015 2014
WACS Activations - 73,267,388
Total - 73,267,388 The “Other debtors – non-current” item relates to the contribution of capital for the WACS T segment, with respect to the terminal stations in which the Company activated circuits. In 2015, the value under this item was written off and booked under “Other non-operating income” bearing in mind that the value of the asset depends on the activation the circuits by other members of the WACS consortium, which is out of the Company's control.
95 Annual Report 2015
Notes to the Financial Statements
10. CASH AND CASH EQUIVALENTS 10.1 COMPOSITION The “Cash and cash equivalents” item records deposits held by the company in banking institutions at 31 December 2015 and 2014.
Items 2015 2014
Demand deposits 1,305,917,522 727,964,522 Cash 823,816 1,243,318 Deposit of committed appropriations 1,177,181,933 2,982,774,995 Total 2,483,923,270 3,711,982,835
The committed appropriations correspond to 1,177,182 thousand kwanzas relating to supplementary capital from shareholders for funding of the SACS and Monet submarine cable construction projects.
11. OTHER CURRENT ASSETS 11.1 COMPOSITION At 31 December 2015 and 2014, the "Other current assets" item comprised the following:
Items 2015 2014
Deferred costs 43,004,139 103,156,536
Total 43,004,139 103,156,536 The "Deferred costs" item relates to sums paid in advance with respect to property rents, insurance, and others, the amounts of which will be recognised in future financial years.
96 Annual Report 2015
Notes to the Financial Statements
12. SHARE CAPITAL 12.1 COMPOSITION OF SHARE CAPITAL At 31 December 2015, the company's share capital, amounting to Akz 390,000,000.00 or USD 5,000,000.00 was fully subscribed and paid up. The Company's capital is broken down as follows:
Items Initial balance Increases Decreases Final balance
Share capital 390,000,000 - - 390,000,000 Supplementary capital contributions 12,741,046,741 10,360,000 - 12,751,406,741 Total 13,131,046,741 - - 13,141,406,741
The share capital is divided into 1,000,000 shares, each with a value of Akz 390.00, which are held as follows:
Number of Entities % held Value Shares
Angola Telecom - E.P. 51.00% 510,000 198,900,000 Unitel, S.A. 31.00% 310,000 120,900,000 Mercury - Serviços de Telecomunicações, S.A. 9.00% 90,000 35,100,000 Movicel - Telecomunicações, Lda. 6.00% 60,000 23,400,000 Mundo Startel, S.A. 3.00% 30,000 11,700,000 Total 100.00% 1,000,000 390,000,000
12.2 COMPOSITION OF SUPPLEMENTARY CAPITAL CONTRIBUTIONS At 31 December 2015, the "Supplementary capital contributions" heading comprised the following:
Entities 2015 2014
Angola Telecom - E.P 6,691,200,000 6,691,200,000 Unitel, S.A. 4,067,200,000 4,067,200,000 Mercury - Serviços de Telecomunicações, S.A. 1,180,800,000 1,180,800,000 Movicel - Telecomunicações, Lda. 540,000,000 540,000,000 Mundo Startel, S.A. 272,206,741 261,846,741 Total 12,751,406,741 12,741,046,741
97 Annual Report 2015
Notes to the Financial Statements
12.3 CHANGES DURING THE YEAR During the year ended 31 December 2015, changes under the “Share Capital” item was as follows:
Entities Initial balance Increases Decreases Final balance
Angola Telecom - E.P 6,691,200,000 - - 6,691,200,000 Unitel, S.A. 4,067,200,000 - - 4,067,200,000 Mercury - Serviços de Telecomunicações, S.A. 1,180,800,000 - - 1,180,800,000 Movicel - Telecomunicações, Lda. 540,000,000 - - 540,000,000 Mundo Startel, S.A. 261,846,741 10,360,000 - 272,206,741 Total 12,741,046,741 10,360,000 - 12,751,406,741
The increases recorded under the "Supplementary capital contributions" item relate to capital payments by the shareholder Mundo Startel, S.A., as part of their commitment towards funding of the WACS submarine cable. The overall amount of “Supplementary capital contributions” relates to the commitment towards funding the WACS submarine cable, up to a limit in kwanzas equivalent to 90,000,000 US dollars, and the SACS and Monet submarine cables, up to a limit in kwanzas equivalent to 40,000,000 US dollars. At 31 December 2015, the amount of supplementary capital to be paid was 368,089,259 kwanzas, as follows:
Entities Value
Movicel - Telecomunicações, Lda. 246,864,000 Mundo Startel 121,225,259 Total 368,089,259
The amount of supplementary capital to be paid by the shareholder Movicel relates to its commitment towards funding the SACS and Monet submarine cables, while the amount of supplementary capital to be paid by the shareholder Mundo Startel relates to its commitment towards funding the WACS submarine cable.
98 Annual Report 2015
Notes to the Financial Statements
14. RETAINED EARNINGS At 31 December 2015, the "Retained earnings" item comprised the following:
Items Initial balance Increases Decreases Final balance
Results from the previous financial year 1,871,456,801 - 196,495,686 2,067,952,487 Total 1,871,456,801 - 196,495,686 2,067,952,487
15. MEDIUM AND LONG-TERM LOANS
At 31 December 2015, the "Medium- and long-term loans" item comprised the following:
Medium- and long-term loans 2015
Capital Angola Telecom - E.P 708,663,403 Unitel, S.A. 1,408,779,690 Mercury - Serviços de Telecomunicações, S.A. 581,453,327 Movicel - Telecomunicações, Lda. 621,476,047 Interest Angola Telecom - E.P 116,753,157 Unitel, S.A. 172,491,289 Mercury - Serviços de Telecomunicações, S.A. 74,332,411 Movicel - Telecomunicações, Lda. 26,167,466
Total 3,710,116,790
The values under the "Medium- and long-term loans" item relate to sums paid by shareholders in excess of their share of the maximum supplementary capital limit of 9,000,000,000 kwanzas (WACS), which are recognised as shareholder loans. These loans earn annual interest corresponding to the 6-month USD LIBOR rate, plus 3%. At 31 December 2015, the due interest totalled 389,744 thousand kwanzas. In 2015, the due interest was recognised under this item (see notes 18, 31, and 33), which includes corrections relating to previous years to the value of 17,000 kwanzas and the cancellation of a debit note from a shareholder booked in the previous year to the approximate value of 17,000 Kwanzas, the cumulative effect of which did not affect the income statement.
99 Annual Report 2015
Notes to the Financial Statements
18. PROVISIONS FOR OTHER RISKS AND CHARGES
At 31 December 2015 and 2014, the "Provisions for other risks and charges" heading comprised the following:
Items Initial balance Increases Decreases Final balance
Period ended in 2015 Tax provisions - 251,206,242 - 251,206,242 Provisions for other risks and charges Interest on shareholder loans 275,902,303 - (275,902,303) - Total 275,902,303 251,206,242 (275,902,303) 251,206,242
Period ended in 2014 Provisions for other risks and charges Interest on shareholder loans 178,442,465 97,459,838 - 275,902,303 Total 178,442,465 97,459,838 - 275,902,303
19. ACCOUNTS PAYABLE 19.1 COMPOSITION At 31 December 2015 and 2014, the “Accounts payable” item related to current balances and had the following breakdown:
Items Current Non current Total
Period ended in 2015 Suppliers, current account Non-group suppliers 676,430,587 - 676,430,587 Group suppliers (Note 40) 138,750,507 - 138,750,507 The state and other public entities 162,811,617 - 162,811,617 Customers – credit balance 10,571,501 - 10,571,501 Total 988,564,212 - 988,564,212
Period ended in 2014 Suppliers, current account Non-group suppliers 1,168,543,610 - 1,168,543,610 Group suppliers 213,446,743 - 213,446,743 The state and other public entities 30,115,645 - 30,115,645 Customers – credit balance 1,142,400 - 1,142,400 Total 1,413,248,398 - 1,413,248,398
100 Annual Report 2015
Notes to the Financial Statements
19.2 THE STATE AND OTHER PUBLIC ENTITIES At 31 December 2015 and 2014, the "State and other public entities" heading comprised the following:
The state and other public entities 2015 2014 Excise Duty 127,916,796 6,983,256 Withholding tax (Law 19/14) 13,794,181 7,686,866 Labour income tax 8,103,200 4,860,354 Social security contributions 6,923,634 3,557,247 Stamp duty 5,661,830 6,817,801 Property tax 411,976 210,120 Total 162,811,617 30,115,644
19.3 CUSTOMERS - CREDIT BALANCE At 31 December 2015 and 2014, the "Customers - credit balance" heading comprised the following:
Customers balances 2015 2014 Banco de Investimento Rural 1,142,400 1,142,400 Banco Fomento Angolano 9,429,101 - Total 10,571,501 1,142,400
21. OTHER CURRENT LIABILITIES
At 31 December 2015 and 2014, the "Other current liabilities" heading comprised the following:
Items 2015 2014
Deferred income 366,654,901 365,649,996 Supplier expenses 111,768,526 142,728,990 Remuneration expenses 109,034,166 54,074,394 Accounts payable 8,011,146 - Deferred favourable exchange rate balances - - Total 595,468,739 562,453,380
101 Annual Report 2015
Notes to the Financial Statements
The “Deferred income” item relates to sums billed to customers for services to be provided in future financial years, including the sale of IRU (“Indefeasible Right of Use”), the income from which spans over a period of 15 years. The “Supplier expenses” item relates to sums set aside for current debt to suppliers with respect to costs in 2015, the invoices for which will be received by the company in 2016. The estimates essentially relate to sums due to INACOM and maintenance and repair costs. The “Remuneration expenses” item relates to sums set aside for remunerations to be paid in 2016.
Notes to the income statement 23. PROVISION OF SERVICES 23.1 PROVISION OF SERVICES BY MARKET At 31 December 2015, the “Provision of Services” item had the following breakdown:
Items 2015 2014
Domestic market 3,430,880,484 2,011,322,930 External market 783,569,854 526,615,127 Total 4,214,450,338 2,537,938,057
23.2 PROVISION OF SERVICES BY ACTIVITY For the years ended 31 December 2015 and 2014, this item comprised the following: Items 2015 2014
WACS 3,316,840,095 2,316,870,681 Internet 610,680,934 118,079,680 Backhaul 174,785,675 58,562,367 Co-location 66,217,550 27,640,103 Last-mile 44,131,984 16,335,226 Others 1,794,100 450,000 Total 4,214,450,338 2,537,938,057
102 Annual Report 2015
Notes to the Financial Statements
For the years ended 31 December 2015 and 2014, the "WACS" services heading comprised the following:
Items 2015 2014
Shareholder customers 2,996,239,137 1,784,338,334 Other customers 320,600,958 532,532,346 Total 3,316,840,095 2,316,870,681 24. OTHER OPERATING REVENUES AND GAINS At 31 December 2015 and 2014, the “Other operating revenues and gains” item had the following breakdown:
Items 2015 2014
WACS landing provider (Sangano) 98,719,856 84,672,390 Others 16,151,422 - Total 114,871,278 84,672,390
The "WACS landing provider (Sangano)" item relates to services provided to the WACS consortium at the Sangano terminal station for the landing of the fibre optic submarine cable. The sums correspond to contributions towards the operating costs of the station, which are approved annually by the consortium.
28. STAFF EXPENSES At 31 December 2015 and 2014, the "Staff Expenses" item comprised the following:
Items 2015 2014
Remuneration - staff 598,481,701 351,137,059 Remuneration - statutory bodies 149,436,698 118,836,800 Remuneration - related expenses 38,129,400 26,630,135 Training 19,163,127 29,949,742 Work accident and disease insurance 8,265,019 5,990,763 Other staff expenses 107,281,413 1,047,472 Total 920,757,358 533,591,972
103 Annual Report 2015
Notes to the Financial Statements
The "Other staff expenses" item relates to the cost of health insurance, which is provided to all employees, and subsistence allowances provided to employees for business trips. The increase under this item compared with 2014 is mainly due to subsistence allowances provided to employees during the process of incorporating Angola Cables Holding LTDA in Brazil. The average number of employees was 84 in 2015 and 72 in 2014. The increase in the number of employees and the salary review carried out in 2015 explain the significant increase in staff costs.
29. DEPRECIATION At 31 December 2015 and 2014, the "Depreciation" item comprised the following:
Items 2015 2014
Tangible assets (Note 4) Buildings and other constructions 322,880,192 330,303,029 Administrative equipment 40,279,980 25,661,100 Basic equipment 54,044,776 29,361,271 Loading and transportation equipment 31,844,203 38,742,348 Land and natural resources 3,669,539 3,669,539 Other tangible assets 359,382 208,616 Intangible assets (Note 5) Other intangible assets 28,202,706 7,770,975 Total 481,280,778 435,716,878
30. OTHER OPERATING EXPENSES AND LOSSES 30.1 COMPOSITION At 31 December 2015 and 2014, the "Other operating expenses and losses" item comprised the following:
Items 2015 2014
Subcontracts 348,032,430 273,091,117
Supplies and third-party services (Note 30.2) 1,705,833,365 1,555,859,488
Taxes 43,303,134 16,575,202
Total 2,097,168,929 1,845,525,807
104 Annual Report 2015
Notes to the Financial Statements
For the years ended 31 December 2015 and 2014, the "Subcontracts" heading comprised the following:
Item 2015 2014
Connectivity 348,032,430 273,091,117 Total 348,032,430 273,091,117 The "Connectivity" item relates to the lease of third-party transmission circuits, which are necessary to ensure service provision to customers, in particular the lease of dark fibre between Sangano and Angonap and the lease of local access circuits (Last Mile) in the home market and abroad.
30.2 SUPPLIES AND THIRD-PARTY SERVICES For the years ended 31 December 2015 and 2014, the "Supplies and third-party services" item comprised the following:
Items 2015 2014
Fees 628,109,227 541,183,254 Maintenance and repair 342,488,279 287,111,313 Travelling and subsistence allowances 139,861,166 145,505,593 Leases and rentals 114,277,983 92,819,437 Maintenance and repair materials 78,805,401 286,318 Other services - INACOM Licenses 72,289,684 71,555,637 Advertising and publicity 71,309,128 114,505,717 Technical support 64,565,104 106,309,832 Communication 40,452,243 73,959,050 Fuel and other fluids 37,802,939 28,517,286 Monitoring and security services 34,415,733 31,826,576 Commission fees 22,681,761 12,716,998 Cleaning, hygiene and comfort 15,238,879 10,905,142 Insurance 13,072,023 9,340,972 Office materials 8,713,293 6,629,697 Water 7,678,626 6,876,486 Representation expenses 3,556,927 4,578,802 Fast-wearing tools and appliances 3,491,063 8,218,180 Books and tecnical documentation 1,832,800 536,681 Legal services 1,074,555 2,377,209 Electricity 602,000 99,308 Protection, security, and comfort materials 367,525 - Other supplies 3,147,026 - Total 1,705,833,366 1,555,859,488
105 Annual Report 2015
Notes to the Financial Statements
The "Fees" item relates to expenses from financial (in 2014 only), commercial, legal, and business consultancy services, as well as financial auditing, for the support to the company's activity and development. The "Maintenance and repair" item relates to costs arising from maintaining the technical facilities, namely the Sangano station and Angonap, as well as the maintenance and repair of the WACS fibre optic submarine cable. The "Travelling and subsistence allowances" heading relates to travel and accommodation costs of business trips. The "Advertising and publicity" item relates to the cost of promoting the company's services and image, including the participation in international telecommunications fairs. The "Technical support" item relates to the cost of specialised technical services for the operation and maintenance of the technical facilities, namely Angonap and the Sangano station. 31. FINANCIAL RESULTS At 31 December 2015 and 2014, the "Financial Results" item comprised the following:
Items 2015 2014
Financial income Favourable exchange rate balances 374,908,004 123,148,885 Interest on late payment – receivables - 130,553 Bank interest 78,515,357 9,955,014 Cash discounts - 950,205 453,423,361 134,184,656
Financial costs Unfavourable exchange rate balances 331,127,038 17,514,826 Interest on shareholder loans 96,809,088 - Bank services 10,917,361 6,448,537 438,853,488 23,963,363 Total 14,569,873 110,221,294
The "Bank services" heading relates to commission fees for international payments, as well as money transfer and administration fees, which are charged by banks. The "Unfavourable exchange rate balances" heading relates to exchange rate variations and commission fees for the purchase of foreign currency (USD), for international payments. The "Bank interest" item relates to income from short-term cash investments. The "Favourable exchange rate balances" heading relates to the revaluation of assets and liabilities in foreign currencies, taking into account the exchange rate changes between the moment of acquisition or booking and the end of the financial year. The "Interest on shareholder loans" item concerns interest due on shareholder loans, which in previous years came under the “Other non-operating income" item (note 33).
106 Annual Report 2015
Notes to the Financial Statements
33. OTHER NON-OPERATING INCOME At 31 December 2015 and 2014, the "Other non-operating income" item comprised the following:
Items 2015 2014
Other non-operating income Stock gains 2,649,625 - Supplier claims 18,099,144 - 20,748,769 -
Other non-operating costs Provisions Other risks and charges (Note 18) 251,206,242 - Corrections relating to previous financial years 63,539,459 - Interest on shareholder loans - 114,492,769 314,745,701 114,492,769 Total (293,996,932) (114,492,769)
The "Interest on shareholder loans" heading concerns interest due on shareholder loans, in accordance with the terms and conditions of the company's shareholders' agreement. 35. INCOME TAX In the year ended 31 December 2015, no provision for corporate income tax was recorded, since the company is entitled to a tax credit due to recorded losses in previous financial years.
Other notes relating to the financial position and operating results 36. COMMITMENTS NOT REFLECTED UNDER LIABILITIES At 31 December 2015, the company has a bank guarantee in the amount of USD 42,443,439 for the Monet investment project. This guarantee is provided by the BFA bank to the supplier Tyco Electronics Subsea Communication LLC (the Monet submarine cable supplier). The company bears a 3% per annum commission fee on the guaranteed sum. This fee is capitalised since it is considered part of the project cost due to the fact that such guarantee is a requirement from the supplier.
107 Annual Report 2015
Notes to the Financial Statements
38. EVENTS AFTER THE BALANCE SHEET DATE There have been no events after the balance sheet date that might alter the presentation of or the information contained in these financial statements.
40. TRANSACTIONS WITH RELATED ENTITIES At 31 December 2015 and 2014, the company held significant balances with related entities. The details of these balances at those dates were as follows:
31 December 2015 Assets Liabilities Customers, Suppliers, Medium and Entity Other debtors current current Interest Total assets long-term Total liabilities (Note 9) accounts accounts accruals loans (Note 15) (Note 9) (Note 19)
Angola Telecom - E.P - 1,624,913,286 1,624,913,286 125,377,352 708,663,403 116,753,157 834,040,755 Unitel, S.A. - 184,474,413 184,474,413 7,267,673 1,408,779,690 172,491,290 1,416,047,363 Mercury - Serviços de Telecomunicações, S.A. - 216,321,800 216,321,800 - 581,453,327 74,332,412 581,453,327 Movicel - Telecomunicações, Lda. - 226,867,945 226,867,945 - 621,476,047 26,167,466 621,476,047 Mundo Startel, S.A. - 134,901,411 134,901,411 6,105,482 - - 6,105,482 Total - 2,387,478,855 2,387,478,855 138,750,507 3,320,372,467 389,744,324 3,459,122,974
31 December 2015 Equity Supplementary Entity Share capital Capital Total equity (Note 12.1) Contributions (Note 12.2)
Angola Telecom - E.P 198,900,000 6,691,200,000 6,890,100,000 Unitel, S.A. 120,900,000 4,067,200,000 4,188,100,000 Mercury - Serviços de Telecomunicações, S.A. 35,100,000 1,180,800,000 1,215,900,000 Movicel - Telecomunicações, Lda. 23,400,000 540,000,000 563,400,000 Mundo Startel, S.A. 11,700,000 272,206,741 283,906,741 Total 390,000,000 12,751,406,741 13,141,406,741 31 December 2015 Transactions during the year Entity Provision of Supplies and Interest on Subcontracts services services loans
Angola Telecom - E.P 199,996,202 125,429,852 - 24,319,828 Unitel, S.A. 1,528,495,228 292,789,902 - 48,262,110 Mercury - Serviços de Telecomunicações, S.A. 690,902,507 444,893,940 - 19,919,484 Movicel - Telecomunicações, Lda. 493,992,100 - - 21,290,586 Mundo Startel, S.A. 67,104,000 6,563,651 - Total 2,980,490,037 869,677,344 - 113,792,009
108 Annual Report 2015
Notes to the Financial Statements
31 December 2014 Assets Liabilities Customer Supplier, Medium and Entity Other debtors current current long-term Total Total assets (Note 9) accounts accounts loans (Note liabilities (Note 9) (Note 19) 15)
Angola Telecom - E.P 1,235,865,934 19,480,730 1,255,346,664 9,670,549 708,663,403 718,333,952 Unitel, S.A. - - - 9,206,829 1,408,779,690 1,417,986,519 Mercury - Serviços de Telecomunicações, S.A. 40,280,814 8,768,550 49,049,364 177,048,050 581,453,327 758,501,377 Movicel - Telecomunicações, Lda. 151,078,824 - 151,078,824 17,032,931 621,476,047 638,508,978 Mundo Startel, S.A. 85,539,413 1,578,932 87,118,345 488,384 - 488,384 Total 1,512,764,985 29,828,212 1,542,593,197 213,446,743 3,320,372,467 3,533,819,210
31 December 2014 Equity Supplementary Entity Share capital Capital Total equity (Note 12.1) Contributions (Note 12.2)
Angola Telecom - E.P 198,900,000 6,691,200,000 6,890,100,000 Unitel, S.A. 120,900,000 4,067,200,000 4,188,100,000 Mercury - Serviços de Telecomunicações, S.A. 35,100,000 1,180,800,000 1,215,900,000 Movicel - Telecomunicações, Lda. 23,400,000 540,000,000 563,400,000 Mundo Startel, S.A. 11,700,000 261,846,741 273,546,741 Total 390,000,000 12,741,046,741 13,131,046,741
31 December 2014 Transactions during the year Entity Provision of Supplies and Non-operating Subcontracts services services costs
Angola Telecom - E.P 914,812,551 - 7,623,112 24,436,064 Unitel, S.A. 560,344,884 79,218,000 47,394,010 48,577,408 Mercury - Serviços de Telecomunicações, S.A. 173,711,450 166,165,702 - 20,049,619 Movicel - Telecomunicações, Lda. 108,321,655 - - 21,429,678 Mundo Startel, S.A. 57,130,150 - 7,152,243 - Total 1,814,320,689 245,383,702 62,169,364 114,492,769
109 Annual Report 2015
Certification of the Report and Accounts 2015
THE BOARD OF DIRECTORS
President:
Vice-President:
Member:
Member:
Member:
Member:
Member:
ACCOUNTANT OFFICER
110 111 Annexes 113 Annual Report 2015
Opinion of the External Auditor
Independent Auditor’s Report We audited the attached financial statements for ANGOLA CABLES S.A. ("Company"), which comprised the balance sheet at 31 December 2015 (showing a total of Akz 17,169,498 thousand and total equity of Akz 11,624,142 thousand. This includes net income of Akz 550,687 thousand), the Profit and Loss Statement by Nature, and the Cash Flow Statement for the year ended on that date, as well as the Notes to the Accounts.
Board of Directors Responsibility for the Financial Statements
The Board of Directors is responsible for adequately preparing and presenting these financial statements in accordance with the generally accepted accounting principles in Angola and for the internal control it deems necessary for preparing the financial statements without any materially relevant misstatements owing to fraud or error.
Auditor Responsibility
It is our responsibility to express an opinion on these financial statements based on our audit, which was conducted in accordance with the International Standards on Auditing. These regulations require us to comply with ethical requirements and carry out the audit to reasonably ensure that the financial statements are free from materially relevant misstatements. An audit involves carrying out procedures to provide audit evidence on the amounts and disclosures contained in the financial statements. The procedures selected depend on the auditor's judgement, including an assessment of the risk of misstatements in the financial statements owing to fraud or error. Upon making these risk assessments, the auditor considers the entity's internal control over the preparation and presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not with the aim of expressing an opinion on the effectiveness of the entity's internal control. An audit also involves assessing the suitability of the accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as the overall presentation of the financial statements.
114 Annual Report 2015
Opinion of the External Auditor
We are convinced that the audit evidence obtained is sufficient and appropriate, providing us with a basis for our auditing opinion.
Opinion
In our opinion, the previously mentioned financial statements present a true and fair view of the financial situation of ANGOLA CABLES, S.A. at 31 December 2015 and its financial performance and cash flows relating to the financial year ended on that date, in accordance with the generally accepted accounting principles in Angola.
Luanda, 20 May 2016
Ernst & Young Angola. Lda. Represented by:
Rui Abel Serra Martins Partner
115 Annual Report 2015
Glossary and Abbreviations
ACE – Africa Coast to Europe submarine cable that Exabyte – unit equal to 1,000 Petabytes (Petabyte – connects France to South Africa unit equal to 1,000 Terabytes; Terabyte – unit equal Backhaul – fibre optic transmission system to 1,000 Gigabytes); byte isthe unitof 8 bits usedin between the connection point to the main network digital communications. (backbone) and the customer access point (for example, between the Sangano station and IP (Internet Protocol) – communications AngoNAP). technology used bythe Internet. Backbone – central element of a ISP (Internet Service Provider) – provider of telecommunications network, with a large accesstothe Internet. transmission capacity, through which other segments of the network interconnect. IXP (Internet Exchange Point) – infrastructure that allowsthe exchange of traffic between ISPs. Colocation – category of services provided in a data centre to host equipment and content. Main One -submarine cable between Portugaland South Africa
CDN (Content Delivery Network) – Digital Mbps – Megabits per second, unit of speed (or content distribution network. bandwidth)for digital communications. CLS (Cable Landing Station) – Station where MPLS (Multi Protocol Label Switching) – one end of the submarine cable (branch or trunk) is technology that increasesthe efficiencyof a digital terminated and connected to the terrestrial network. communicationsnetwork, combining various communications standards (protocols)and allowing Data Centre – infrastructure for housing ICT equipment, ensuring high levels of capacity, the differentiated managementof service quality. connectivity, availability, and security. NOC (Networking Operations Centre) – Download – transfer of data from a remote server managementand operations centre for a to a local computer. telecommunications network. DWDM (Dense Wavelength-Division OECD (Organisationfor Economic Co- Multiplexing) – technology for increasing the operationand Development) – with volume of communications (bandwidth) of an optical headquartersin Paris. transmission medium. Peering – connectionof two networksfor exchanging EASSY (Eastern Africa Submarine Cable System) – fibre optic submarine cable that connects traffic, usually free. South Africa to Sudan. GDP – Gross Domestic Product EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) – an indicator of POP (Point of Presence) – Infrastructure through a company’s financial performance, often used as a which customers and other operators access an proxy for the earning potential of a business. operator's telecommunications network. Developed Economies – countries with an above- average level of economic and social development, according to generally accepted criteria (e.g. per capita GDP, level of industrial development, and the human development index). ERP (Enterprise Resource Planning) – accounting , financial, and human resources information system. Ethernet – technology for local computer networks.
116 Annual Report 2015
Glossary and Abbreviations
p.p. – percentage points. PTC – Pacific Telecommunications Council RFS (Ready For Service) – date on which a new telecommunications system is declared ready to enter into service. Root Server – server that translates website names into IP addresses. SACS (South Atlantic Cable System) – fibre optic submarine cable between Sangano (Angola) and Fortaleza (Brazil), belonging to Angola Cables. SADC (Southern African Development Community) – economic community of southern African countries. SAP – market leader in the corporate software and applications market, namely ERPs. SAT-3 (South Atlantic 3/West Africa Submarine Cable) – submarine cable that connects Europe to Asia via South Africa. Tbps – Terabits per second, unit of speed (or bandwidth) for digital communications (equal to 1 million Mbps). ICT – Information and Communication Technologies. WACS (Western Africa Submarine Cable) – submarine cable that connects South Africa to Portugal, extended to the United Kingdom.
117 Head Office Lote Cellwave, 2º andar Via AL5, Zona XR6B - Talatona Luanda - Angola AS Number 37468
CLS Sangano Praia de Sangano, Município da Kissama, Luanda – Angola
Fortaleza CLS Praia do Futuro Ceará, Brazil
Angonap Avenida Pedro Castro Van Dúnem Loy – Talatona Luanda – Angola
Contacts Phone: +244 227 360 006 [email protected] [email protected] www.angolacables.co.ao