2016 Annual Report

2016 Annual Report

Table of Contents

1 Orange Slovensko 5 Customer Care 6 – 15 To achieve all of our goals, we strive to keep looking ahead 38 – 43 We grow deep relationships with our customers and we grow together 2 Letter from the CEO 16 – 21 With the right captain at the wheel, the course is always clear 6 Employees 44 – 49 We support team spirit and, individual strength 3 Slovak Telecommunications Market of our employees 22 – 27 With our common effort and perseverance, we can tip the balance of things to our side 7 Corporate Social Responsibility 50 – 61 We feel the need to protect what we care about 4 Orange Slovensko on Telecommunications Market and to develop what is beautiful 28 – 37 By joining forces we can always get to the desired goal 8 Financial Statement 62 – 117 We work to make our results speak for us

4 5 Orange Slovensko

To achieve all of our goals, 1we strive to keep looking ahead 2016 Annual Report Chapter 1

Orange Slovensko, a.s., A Member of the Global Orange Group Description of the Company network is now available to more than 80 % of Slovaks. Orange Slovensko, a.s. is the leading telecommu- Registered Office nications company and biggest mobile network Orange Slovensko, a.s. was the fi rst telecom- Metodova 8, 821 08 Bratislava, The Slovak Republic operator in Slovakia. munications operator in Slovakia to launch a state-of-the-art new generation fi xed net- Company Identification Number (IČO) It started its commercial operation on the Slo- work on the basis of FTTH (Fiber To The Home 35697270 vak market in 1997. As of 31 December 2016, – optics for home), which currently covers over Orange Slovensko, a.s. registred 2.883 million 349 thousand households across 22 towns in Date of Entry in the Commercial Register of the Slovak Republic of active mobile network customers and another Slovakia. Orange also provides fi xed internet and 3 September 1996 189 thousand fi xed Internet and digital television digital television through DSL which is available customers. As of 31 December 2016, the revenue across most of Slovakia. Legal Form of Orange Slovensko, a.s. was EUR 551.9 million. Joint-stock Company The quality of services of Orange Slovensko, a.s. Orange Slovensko, a.s. is a member of the glob- complies with the ISO 9001:2000 certifi cation Identification of the Entry in the Commercial Register al Orange Group, one of the biggest mobile criteria, and the company also holds the Environ- Registered in Bratislava I District Court Commercial Register, network operators and broadband internet pro- mental Management Certifi cate pursuant to ISO Section: Sa, Insert No.: 1142/B viders in Europe. As of 31 December 2016, the 14001:2004. With its Orange Foundation, Orange Orange Group had revenues of EUR 40.9 billion, Slovensko, a.s. is a leader in the fi eld of corporate with 263 million customers using its services social responsibility and corporate philanthropy in 29 countries of the world. in Slovakia.

Orange is the leading mobile broadband The 100 % shareholder of Orange Slovensko, Internet provider, using 3G and 4G networks. a.s. is the Orange Group through Atlas Services High-speed mobile Internet coverage exceeded Belgium. 95% of Slovakia's population, and Orange's 4G

8 9 2016 Annual Report Chapter 1

Company Bodies

Board of Directors Company Management

Chairman Pavol Lančarič Pavol Lančarič Vladislav Kupka Vice Chairman Ladislav Rehák Chief Executive Officer Director of Customer Service Department Members Ivan Golian Antoine Guillaume Guilbaud Andrea Danielová Miloš Lalka Zuzana Nemečková Director of Human Resources Director of Communications Marc Ricau Department and Brand Department

Ivan Golian Ivan Marták Supervisory Board ITN Director Director of Strategy, Legal and Regulatory and Deputy CEO Affairs Department Chairman Bruno Duthoit Vice Chairman Christophe Naulleau Antoine Guillaume Guilbaud Zuzana Nemečková Members Ľuboš Dúbravec Chief Financial Officer Director of Commercial Department Francis Gelibter and Deputy CEO and Deputy CEO Štefan Hronček Mai Céline Pavret de La Rochefordiere

10 11 2016 Annual Report Chapter 1

Pavol Lančarič Andrea Danielová Chief Executive Officer Director of Human Resources Department

Born in 1963. He graduated from the Faculty he has taken management positions in various Born in 1967. She completed her studies at the later Globtel, a.s., and Orange Slovensko, a.s.. of Commerce at the University of Economics multi-national companies. Since 1997, he University of Economics in Bratislava. She has Since 2003, she has also worked as Director in Bratislava and received his PhD in 1991. has been working at Orange Slovensko, a.s., worked in human resources since 1991. Since of Human Resources Department at Orange Between 1990 and 1992, he was a member of where he started as Sales Director. Since 1999, 1996, she had worked as Deputy Director of Slovensko, a.s.. the Advisory Committee of the Prime Minister he has been the CEO of Orange Slovensko, Human Resources Department at Globtel GSM, at the Slovak Government Offi ce. Since 1993, a.s., also serving as a Board member.

Ivan Golian Antoine Guillaume Guilbaud ITN Director and Deputy CEO Chief Financial Officer and Deputy CEO

Born in 1964. He completed his university ked for more than eight years as a member of Born in 1972. He completed his university modelling. Since 2006, he had also worked education at the Slovak Technical University the senior management, ITN Director and Chief studies at the Paris Institute of Political Stu- as a manager and later Director of Control at in Bratislava and achieved his PhD at the De- Operations Offi cer (CIO/CTO/COO). In 2005, dies and was awarded a master's degree. He Mobistar, Brussels. He has worked at Orange partment of Applied Informatics and Automation he became the Deputy Chief Executive Offi - worked in an executive position at the Finan- Slovensko, a.s. since 2012 as Director of the at FMT STU. Beginning in 1993, he worked at cer. Beginning in 2006, he was the VUB Bank´s cial Department of France Telecom between Financial Department. the Department of Electronics and Automation board member and also worked as Director 1998-2000, later at Orange, Paris, where his KIHO in Gent, Belgium, and around two years of Information Technologies and Operations duties involved controlling and network cost later he began to work at Digital Equipment there. Since January 2009, he has been the ITN Corporation as a project manager for the ban- Director at Orange Slovensko, a.s. and he is also king and telecommunications sectors. In 1997, the Deputy CEO and a Board member. he joined Orange Slovensko, a.s., where he wor-

12 13 2016 Annual Report Chapter 1

Vladislav Kupka Ivan Marták Director of Customer Service Department Director of Strategy, Legal and Regulatory Affairs Department

Born in 1974. He completed his studies at the worked as Deputy Manager. He worked as Born in 1964. He completed his studies of 1992 and at the Telecommunications Executi- Faculty of Philosophy of the University of St. Back Offi ce Manager between 2001-2006, la- journalism at the Faculty of Philosophy of the ve Management Institute of Canada in Montre- Cyril and Methodius in Trnava. He started wor- ter as Manager of the B2C Department, and Comenius University in Bratislava. He acc- al in 1995. He has fulfilled various managerial king in sales in 1994 and has worked at Orange has worked as Director of Customer Service -quired his technical education in the field of functions at Slovenské telekomunikácie, š.p. Slovensko, a.s. since 1996. He started as Department at Orange Slovensko, a.s. since telecommunications at the Slovak University since 1993. He has worked as Director of a customer centre employee, continued as July 2008. of Technology in Bratislava. He worked at the Strategies and Regulatory Affairs Department Back Offi ce adviser a year later, and then he International Telecommunication Union from at Orange Slovensko, a.s. since 2001.

Miloš Lalka Zuzana Nemečková Director of Communications and Brands Department Director of Commercial Department and Deputy CEO

Born in 1975. He completed his studies in Director of Communications and Brands Born in 1970. She completed her studies at s r.o. She became Director of Sales, Marketing, 1998 at the Faculty of Management of Come- Department in 2012. He has worked as Director the Faculty of Commerce of the University of and the Communication Department at Rajo nius University in Bratislava. He has worked of Communications and Brands Department Economics in Bratislava. She started working a.s. in 1996. She has worked as Director of the at Orange Slovensko, a.s. since 2003, starting at Orange Slovensko, a.s. since 2013. as an Executive Assistant in 1993 and later as Commercial Department at Orange Slovensko, as Advertising Manager. He became Deputy Marketing Manager at Tchibo Slovensko spol. a.s. since 2001.

14 15 2 Letter from the CEO

With the right captain at the wheel, the course is always clear 2016 Annual Report Chapter 2

2016 Annual Report Letter from the CEO Ladies and gentlemen, services. I am very pleased, that last year we dear shareholders, customers were able to introduce a new role for Orange and employees in Slovakia which responds to new customer needs brought by the digital age. We want the Orange has retained a stable position in its 20th digital era services to be more accessible and year of commercial operation, and closed the easier to understand for customers, we want year 2016 as number one in the mobile market. to deliver useful services to make life easier. It is an honour for me to share the results of the An example of this approach is the new portfolio past year which we have achieved, with you. of plans, including the data-oriented packages, Max and Data Max. Further evidence of fulfi lling We have had a very rewarding year - rich in the brand promise to help customers exploit changes and activities in which we tried to get the benefi ts of technology was the introduction even closer to our customers. In the 20 years we of new service types such as the Internet for have been operating on the market, communi- cars, glucometer in smart phone or the GPS cations amongst people have greatly changed. locator. At fi rst sight, these are not standard Technological development is progressing by telecom services, however they are an exam- leaps and bounds, whilst the needs of the people ple of how technology can help people in their are changing. Today, more than 65 % of custo- daily lives. I am proud to draw attention to the mers use smart phones, and calling ranks 6th new concept of inspirational stores, so called place amongst the features that customers use Smart Stores. We opened 13 of them last year. on their phones. Communication as we knew We want to inspire consumers to use new ser- it, is changing its form and being transferred vices, increase their comfort and bring a whole to the Internet. new experience at the point of sale. At Orange, we all are aware that only a unique customer Orange is also being developed to fulfi l the experience with Orange can differentiate us requirements of people and bring them useful from the competition.

18 19 2016 Annual Report Chapter 2

We have confi rmed our profi le as a compre- lity of our high-speed Internet to more people. television through optics from Orange. There are Dear ladies and gentlemen, I am proud that hensive telecommunications provider, by the Already today, we provide the widest coverage 3 more cities with the most modern Orange opti- together we were able to build one of the stron- introduction of new concepts of convergent of mobile broadband Internet amongst all ope- cal network in Slovakia since last year. gest brands of the past 20 years. A brand that offers with Orange Mix, which I think was a key rators in Slovakia, available for more than 95% of daily connects people with everything that mat- commercial activity last year. These are new type the Slovak population. The importance of quality The economic results that we have achieved, ters to them. We have succeeded in this because of packages with unique benefi ts relevant to and network availability is confi rmed by the ever have been developing in line with our expec- we listened to customers and brought the rele- specifi c types of customers, who choose to use growing volume of data transferred over mobile tations. They naturally mimic the situations in vant services to them. Let me use this space here mobile and fi xed services at Orange. networks. Last year, Orange customers trans- the telecommunications market, as well as the to thank the shareholders for their trust without ferred more than 15.3 million GB of data in total, changing communication behaviour of people. which we could not bring new inspirational and Also thanks to the real proof of fulfi lling the brand 25 % more than in 2015, out of which more than Revenues from traditional telecommunications useful products and services to our customers, promise to bring customers useful services that 42 % were transferred within the 4G network. services have long been in decline. The fastest let me thank our employees for their daily hard are relevant to them and facilitate their lives, most Thanks to an intense expansion in last year, growing component of revenues have traditional- work and contribution to our common success customers decided to sign a contract right with the network is already available for 80 % of the ly been the revenues from mobile data services. and also, to our customers for their trust in us. Orange. By the end of 2016 there were more Slovak population, and the speed of mobile Their growth, however, was not enough to com- I look forward to new challenges in 2017, which than 640,000 of them. Overall, we registered Internet up to 225 Mbit/s can be enjoyed by more pensate for the development of revenues from I believe, will bring many new ideas on how we 2,883,000 active mobile customers and 189,000 than a fi fth of Slovaks. mobile voice services. Total revenues from mo- can be the most useful to our customers through customers within the fi xed service, including bile data services accounted for 22.6 %, with a our services. 74,000 digital TV customers, as of 31 December I am grateful that our strategy of convergent year on year increase of 3 %. More and more of 2016. The number of customers of mobile data offers and profi ling as a comprehensive provider signifi cant proportion of the incomes are the fi xed services grew by 7 % to 1.35 million customers is also supported by our shareholder. In 2016, service revenues, with a year-on-year increase of and the number of fi xed Internet customers in- we were able to announce one of our largest 9 %, their share in total revenues was almost 5 %. creased to 161,000. investment projects of recent years, the 35 million The overall decline in revenues has stabilized, EUR investment, into the coverage of Slovakia year on year total revenues decreased by 2 %, Pavol Lančarič So that our customers can fully and without by optical network from Orange. It will result in and as of 31 December 2016, they amounted to CEO and Chairman of the Board restriction, enjoy all the benefi ts of digital services 38 new locations in which households will be EUR 551.9 million. Orange Slovensko, a.s. provided by Orange, we expanded the availabi- able to use the fi xed optical Internet or digital

20 21 3 Slovak Telecommunications Market

With our common effort and perseverance, we can tip the balance of things to our side 2016 Annual Report Chapter 3

Slovak Telecommunications Market in 2016

A strong competitive environment causing price pared to previous year and amounted to EUR Value of the telecommunications market in Slovakia by service (in million EUR) erosion, as well as continuing regulation, have 1.815 million. The market decline occurred been the factors faced by the Slovak telecom- despite the growth in number of customers 2014 2015 2016 munications market for several years. In 2016, of telecom operators. The number of custo- Revenues of mobile telecommunication 61 64 66 these factors caused further, albeit slight decline mers in all segments has increased in the services in 2016 decreased by 0.7 %, on the other hand, the revenues from in the value of the telecommunications market. telecommunications market. Compared to last 170 178 183 fi xed services and pay-TV grew by 0.7 %.

The total value of the telecommunications year it increased by 2.4 % to nearly 11 million Source: Data published by operators 137 133 125 market in 2016 decreased by 0.5 percent com- active customers. 52 59 60

Development of the value of the telecommunications market in Slovakia and the share of each operator (in million EUR)

2014 2015 2016 2,791 883 875 952 After an increase in 2015, the telecommunications market experienced a slight decrease in 2016, 581 561 549 reaching the level of 2014 Data services/transfer Source: Data published Fixed Internet by operators Fixed Voice 130 136 125 Mobile Data Services

767 783 766 Mobile Voice Services Orange Slovensko 376 314 370 Paid TV Slovak Telekom Other O2 Slovakia 224 245 251 Total of 1,811 Total of 1,824 Total of 1,815 47 47 50 UPC Broadband Slovakia 191 188 199 Other top 13

Total of 1,811 Total of 1,824 Total of 1,815 24 25 2016 Annual Report Chapter 3

Development of the number of customers in the mobile telecommunications market (in thousands) The dominant share in the value of the The number of subscribers in the pay-TV

telecommunications market is still kept by the segment increased year-on-year by 2.4 %. At the end of 2016, the fourth operator who 2014 2015 2016 entered the Slovak telecommunications segment of mobile services, amounting to EUR Pay-TV services are now used by nearly 93 % market in October 2015, registered nearly 935 million, representing 51.6 % of the total of households that have a choice of more and 180,000 customers, reaching a market share of 2.6 %. market value. The value of mobile voice and more programs, quality content and additional 172 100 Source: Data published by operators 2,874 1,901 1,892 1,684 1,868 1,884 1,809 2,845 SMS has long been in decline, which is only services such as TV archive, rental service, or 2,896

partially offset by an increase in revenues from access to TV on multiple devices via the Internet. Orange Slovensko mobile data. Decline in revenues from mobile The use of packages combining multiple Slovak Telekom telecommunications services is still unable services from one provider (voice + Internet + O2 Slovakia to stop, but the pace of decline has slowed TV) is becoming increasingly popular. signifi cantly. Over the last year the decrease was Swan Mobile 0.7 %. The pay-TV segment, as well as the fi xed The only segment in which we, long-term Internet segment recorded a signifi cant annual see the reduction in users is the fi xed voice growth. In the case of fi xed Internet by 2.7 % service segment. The main reason for this is Development of number of customers in the telecommunications market (in thousands) and in the case of pay-TV by as much as 5 %. the substitution of fi xed lines by mobile voice The market's biggest growth in the number of services and voice over IP. 2014 2015 2016 customers was shown in the fi xed and mobile 2016 again confi rmed the growing appetite of data services segment again in 2015. Slovaks for data services. A signifi cant dynamic The total number of customers using mobile Source: Data published by operators in the rate of growth in the number of customers services grew by 2.4 % and reached 6.85 million and in the revenue was recorded in the market active customers, representing an increase Mobile Voice Services for mobile data and fi xed Internet. The fi xed of almost 160,000 customers. Penetration of Mobile Data Services Internet segment recorded a 5.1 % year-on-year active SIM cards reached 127 %, while up to

745 Fixed Voice Services 726 328 256 644 306 1,011 1,724 1,764 1,273 5,775 1,020 1,338 5,497 1,690 1,004 1,206 increase in the number of connections, thus 11 % of this number consists of mobile Internet 5,657 achieving a penetration of fi xed Internet of 70 % customers, whose number increased by 2.6 % Fixed Internet in Slovakia. In this segment, Orange Slovensko, year-on-year. Paid TV a.s. company grew at a rate of 5.8 %. Other

Total of 10,313 Total of 10,697 Total of 10,954

26 27 4 Orange Slovensko on Telecommunications Market

By joining forces we can always get to the desired goal 2016 Annual Report Chapter 4

Focusing on a Unique Customer Experience Developments in the Number of Mobile was the Top Priority for Orange in 2016 Data Services Customers

2016 2015 2014 Last year, in line with the main telecom offerings, and Internet access, most customers decided to Orange recorded an increase in the number Orange focused to help customers orient them- sign a contract with Orange in 2016. At the end of customers of data services. The number of selves in the digital age, thanks to useful and of the year there were more than 640,000 of customers of mobile data services grew by 7 % understandable services that freed them from customers. By 31 December 2016, Orange to 1.35 million customers and the number of the technology and to facilitate such things with registered 2.883 million active customers of the fixed Internet customers increased to 161,000. ease into their life. Especially, thanks to the real mobile service by which it retained the biggest This increase included the increase of the num- fulfi llment of the brand promise to bring custo- share of the mobile market, in fact 42 %. Fixed ber of customers of DSL Internet for home and mers the human benefi t of technologies and services from Orange were used by 189,000 of fixed Internet over optic. services useful in other areas, such as basic customers, including more than 74,000 digital 1,174,000 1,260,000 1,350,000 communication services, for example, telephony TV customers. More and more customers are interested in mobile data services of the largest and fastest Orange mobile Development of the number of Orange Slovensko customers network. Their number increased by 7 % year-on-year. Source: Internal data from Orange

Year 2014 2015 2016

Mobile Service Customers 2,844,611 2,896,496 2,882,606 Fixed Service and Digital TV Customer Experience Always Comes First 214,891 200,657 189,244 including Lite TV Customers Total 3,059,502 3,097,153 3,071,850 Central to Orange ambition is to succeed in investment in new types of customer service, the market with a unique customer experience. as well as, via investment in the digital skills A slight decrease of the customer base was primarily caused by intense competition activities It is made up of every single experience that of employees. Operating results of 2016 show

Source: Internal data from Orange customers have with Orange. Orange creates a that the fulfilling of the Orange strategy suc- Unique customer experience via its investments ceeds and Orange orientation for the best in networks, innovations in customer service, possible customer experience is correct.

30 31 2016 Annual Report Chapter 4

We Offer Our Customers People have fun, work and phone more and Therefore, out of the total investment volume available in 22 towns for about 345 thousand Extensive Connectivity Options more through the Internet and send more mes- of over EUR 84 million. Orange directed almost households at the end of 2016. sages. Customers want to be online at any time EUR 58 million to networks. The availability of We live in a digital age that delivers on an and perhaps anywhere they are, with the highest high-speed mobile Internet in 4G network in 2016 Innovation in Customer Services unprecedented customer demand for connec- possible quality on all devices. This is confirmed was extended by Orange to 80 % of the popu- tivity, speed and quality of Internet connections by the amount of data traffic, which is constan- lation. In addition to building the LTE network, When creating each and every service Orange and services. Technological developments chan- tly growing. Compared with 2015 Orange custo- Orange continued to expand in the 3G network. gets inspired by customers’ needs and keeps the ge also to meet the needs of people as well as mers transferred 25 % more data within the mo- The availability of the highest supported speed of basic principles: the relevance and usefulness. their communication behaviour. Mobile telepho- bile data network, whilst half of the total volume 225 Mbit/s available for 25 % of Slovakia's popu- Last year, Orange focused on every service ny is now in 6th place in the order of the functions of 15.63 million of GB data was transferred within lation was also increased. At the end of year, the to really meet customers’ needs, to be helpful that people use on their mobile phones. Com- the 4G network. Orange high-speed mobile Internet coverage, i.e. in their everyday lives and simplify things to them. munication of people is shifting to the Internet. 3G and 4G networks together, exceeded 95 % of the population. An exceptional activity last year, Orange consi- Development of Data Traffi c on the Mobile Network ders launching a new convergent Orange Mix In the second half of 2016, Orange announced offer. This offer has brought a fundamental chan- 2016 one of its largest investment projects, and soon ge to the market in the aspect, that the content started a massive, more than EUR 35 million, in- of the package is aimed at the needs of specifi c 2015 vestment into the expansion of optical networks. target groups and at the same time, each offer Thanks to that, the number of places with avai- actually has benefi ts for both, mobile and fi xed 2014 lable Orange optics will triple by 2018. The result services. Through this concept of convergen- will be 38 new locations in which households will ce offers, Orange responded to new customers’ be able to use the fixed optic Internet or digi- needs that are more than just a desire for a disco- tal television through optics from Orange. First, unt, which is the same for all. Just a discount is Last year, up to 42 % of the total mobile data transferred new locations were covered even by the end not enough for customers. They want something in Orange 4G of 2016. Optical Orange Network Orange was extra, additional value that meets their needs Source: Internal data from Orange

8,759,031,002 12,496,988,658 15,632,057,375 MB MB MB

32 33 2016 Annual Report Chapter 4

and those differ with the target groups. Every customers who do not want to be limited and them fully exploit the possibilities of technology option of immediate payment and a set up of re- customerhas got different expectations of what care about being online for the maximum po- and thus simplify their lives. Such innovations of gular payments. The digital invoice is easily and they want from communication and digital ssible time, Orange has introduced data-oriented last year include, Internet for the car or the “My directly accessible in mobile phones so that it services. At the end of 2016 over 340,000 packages, the benefi ts of which, were apprecia- Glucometer” service, which brought customers can be used and is available to every customer. customers used a combination of at last two ser- ted by nearly 120,000 customers. the glucometer directly to their smart pho- vices from Orange. nes and, the GPS locator that allows location We Support Our Business In the fi xed service area, Orange has brought not accessibility. Customers During the past year, once again, Orange suc- only the optics to new locations, but also new ceeded in making its long-term most successful products of the fast optical Internet – and started However, not only services, but also the actual Orange has long been a major provider of tele- service “Together for Free” more attractive and to offer its customers connection speeds of up approach to customers is one of the key com- communications services to business customer brought the customers, using this unlimited to 500 Mbit/s. In the fi eld of television services, ponents affecting the customer experience. The sectors in the Slovak market. Last year, Orange communication within the group, the additio- Orange has also implemented several changes. new concept of stores launched in 2016, Oran- brought a number of innovations that supported nal benefi t of 1 GB of data per month for free. The most striking was the change of approach in ge improves comfort for its customers, inspires its corporate customers businesses. Security and Almost 100,000 customers activated this servi- the provision of thematic packages of television them to new experiences and brings a whole access checks to corporate data is a high priority ce in 4 months. stations. Now, the customers can choose from new experience at the point of sale. Orange in this business. Therefore, Orange has enhan- a larger number of smaller packages, which stores become places of interaction where custo- ced its range of services with the “Mobile Device Another important activity of 2016 was the brings them a more fl exible option to set up mers can discover new possibilities and fi nd out Management Service”. It enables the customer adjustment plan offers which provided the the programming offer, according to their pre- how their digital services can make life easier. to remotely manage the mobile devices of their customers with useful services that are relevant ferences. In addition, when activating several In addition, they offer a friendly atmosphere, employees, if necessary, for example, to lock, or to them. The new offer includes two groups of packages, the customer obtains more favorable and relaxing areas. During 2016, 13 stores were erase the device remotely, use secure browsing programs that differ in focusing on a particular terms. opened in 11 cities, and there is a plan to open to access the internal corporate network, to de- customer. Although the data services are a clear all stores within the new concept by 2020. The termine which applications can be installed and trend, there are still customers who are faithful to With the new types of services introduced in new digital invoice provides the customer with used in a particular device. Amongst a number the traditional forms of communication, favoring 2016, Orange wants the benefi ts of digitiza- transparent information about their monthly of additional functionalities it also has control- calls and SMS messages. On the other hand, for tion to be more accessible to customers, to help consumption and services used, as well as the led access to corporate email and other useful

34 35 2016 Annual Report Chapter 4

options. Even with employee access to corpo- through targeted SMS messages. A company bility of roaming calls for the same prices as at increasing number of users, the roaming traffi c of rate data from other devices, such as a working can, by setting up the required criteria such as home, Orange always brings its customers so- our customers grew as well. Roaming voice traffi c desktop, the required level of security is retained. demographics or location parameters, very mething extra. Last year it was the “Max Roaming of outgoing calls increased thanks to the Max Thanks to this, customers can better protect their accurately reach its target group at the right time Service” with which customers can get unlimited Roaming Service by 60% and data traffi c business against loss or misuse of sensitive and place and then contact the customer for communication within the EU and in other by more than 150 %. information and data, customers can set their whom the product is truly relevant. The potential countries around the world they communicate for own rules for access to the internal network and of targeted advertising via this innovative ser- 49 cents per minute using either SMS or MB. In addition to the roaming packages, Orange to corporate data, and generally, can determine vice, only previously available mostly, large in automatically offers a free practical bonus the necessary level of safety at work for their corporations, is at Orange now and available to While the appetite of users for mobile communi- service in the form of travel insurance abroad, employees. small businesses and tradesmen. cations without borders increases, the decrease thanks to which, customers can save consi- in roaming prices and favourable services is evi- derable fees. Because of the great success in The portfolio of services for business clients also A Unique Customer Experience dent. Last year, more than two million customers the past year, Orange expanded this service offers an additional tool enabling highly targeted across Borders actively used voice and data roaming by Orange. of insurance cover for the whole family. mobile advertising. “Market Locator Service” More than 350,000 customers activated one allowing the user to reach potential customers Orange customers can happily say goodbye of the advantageous roaming packages which Orange customers mostly use their mobile in the via targeted mobile advertising, and bringing the to borders, as it has long been beyond the EU represents an increase of 30 %. In addition to an Czech Republic, Austria and Germany. opportunity to carry out their own campaigns roaming regulations and, in addition to the possi-

36 37 5 Customer Care

We grow deep relationships with our customers, and we grow together 2016 Annual Report Chapter 5

Customer Care and Simplifi cation of Customer’s Lives

Orange wants to deliver useful services to its customers that are in today's digital age, much ce in stores is enhanced via the electronic read- digital invoice, customers do not have to open customers, to provide them with superior care broader than just the telecommunications ones. ers of identifi cation data, digitized signatures of a separate fi le as with a normal electronic in every area, and also bring improvements The new concept of the stores is not only customers and tablets in the hands of sales staff invoice, each invoice is interactive, and has the so the customers’ contact with Orange is as about their new design, but above all about the that accelerate dealings with customers. Orange character of a simple microsite. In each digital pleasant as possible, and life as a customer is introduction of technology to all people in an stores are in their own way an experience, where invoice, customers will fi nd comprehensive as simple as possible thanks to this approach understandable manner. Facilities and services customers can discover new possibilities and information on their monthly consumption, use from Orange. offered in the stores, are presented in a transpa- fi nd out how digital services can make their lives of services, as well as the option of immediate rent manner in the context of ordinary people's easier. payment or set up of regular payments. Simplify Life and Inspire needs. In addition, the customers can try them The customer gets a direct link to the digital and gain an authentic experience with the facili- In order to improve the customers’ experience invoice to his/her smart phone via SMS. Orange in 2016 welcomed its fi rst customers in ties and services of Orange before they decide to and increase their comfort, Orange brought for the Orange stores arranged in the new concept. buy them. The fi rst Orange store of this kind was customers another useful innovation in 2016 - the Provide Superior Support Its aim in the spirit of the brand promise is to opened in March in Aupark, Bratislava. digital invoice. It streamlines the information, it is bring customers the benefi ts of digital services. easily and directly available in their phone so that In order to communicate with customers, In the course of 2016, Orange increased comfort New digital services associated with the sales it can be used by everybody, and it was alwa- Orange always applied the highest standards for customers through 13 new stores in different process bring many benefi ts of digitization. ys available for the customer. Orange wants the and provided maximum support to its custo- parts of Slovakia. New stores are the respon- Orange, for example, notifi es the customer about digital service times to be more accessible and mers while constantly working on new proce- se to Orange's new communication needs of the current order number via SMS. Convenien- easier to understand for customers. With a new sses, support for employees in direct contact

40 41 2016 Annual Report Chapter 5

with customers. Orange is coming up with new to quality training and skills of staff at points of the Socialbakers company. They evaluate the solutions and in meeting customer needs, they sale or the ever-growing number of customers ratio of answered questions to the total num- instill more and more comfort and ease. From using electronic channels to solve their pro- ber of questions addressed by visitors of social Orange points of sale through Customer Line blems or enquiries. With an index of over 80 networks to individual companies through the 905, which is available around the clock, gui- points, our helpline retained a high level of Facebook pages. Orange has thus been doing dance and assistance at our Facebook profi - satisfaction. very well in this area in 2016. le, and our Internet customer zone or Expert Line - all of these communication channels are The Section of customer care solved about points where the customers can get valuable 52 thousand customer e-mails in the past year. advice in setting services or devices. The majority of them were resolved in less than 24 hours. We also responded to near- Fast and Quality Service ly 15 thousand customer requests through Facebook. The average response to customer In 2016, Customer Line 905 received almost enquiries took less than 8 hours. Thanks to the 1,200,000 calls. Year-on-year, there was quality of our communication with customers a reduction in the number of calls managed, on social networks we regularly manage to by 5.6 %. This result is not only thanks to con- defend our “Socially Devoted” title, awarded tinuously good customer awareness, but also on a regular basis, every quarter of the year by

42 43 6 Employees

We support team spirit and, individual strength of our employees 2016 Annual Report Chapter 6

We Care about Employees

Being a digital and caring employer and thus The corporate social networking application lls. Among the support of staff development of that we really care about promoting a healthy creating conditions for our employees in line “Plazza” has brought fl exible communication activities in 2016, we have invested EUR 817,000 life style. with their daily needs and life, this is the aim of options and access to information. It provides and we have registered 49,997 training hours the Human Resources Department in Orange. a platform for fast and effi cient communication, completed. With the number of 1,104 trained In addition, we were doing well also in the fi eld It means to allow them to develop, and so the organization of working time and sharing employees, this means that on average, each of human resources management in 2016. We fully participate in the company's success, and documents between colleagues, all in all, a stre- employee spent 5.5 days on a variety of educa- retained our position and won the exclusive cer- the entire Orange Group’s success, since the amlined graphic interface. Actively used by more tional activities supported by Orange. tifi cate of “Top Employer”. This prestigious award employees are the main implementers of the than 80% of OSK employees. can only be obtained by companies that undergo Orange ambition - to provide customers with Health Care and High-quality an independent review by the “Top Employers” unique experiences. Our employees are the face To increase the fl exibility of work in 2016, we also Human Resources Management Dutch Institute in human resources management. and voice of Orange Group, because of their made the company's intranet available to our em- The Institute regularly compares and evaluates day-to-day commitment to make our network, ployees, outside the company - from their mobile Also in 2016, the internal program “Orange the leading employers in terms of corporate cul- service or experience to the customer of the devices. Everyone has then gained access to the Healthier” continued to focus on activities sup- ture, job condition preparation, development and highest level. necessary information practically anywhere, and porting health, and healthy life styles of our remuneration of employees, and the opportunity whenever they need it. employees, including sport and leisure activities for career development. Orange Slovensko was To support our commitment to be a caring, and for the second year. Thanks to our "healthy" awarded all three certifi cations - “Top Employer digital employer, we have set ourselves three Education activities for employees, our company can boast Slovakia”, “Top Employer Europe” and the “Top priorities - ensuring the right skills for tomorrow, of second place in the “Healthy Company Com- Employer Global”. developing fl exible ways of working and promo- For the employees to have the opportunity petition” in the category of non-manufacturing ting the involvement of our employees. These to constantly develop in their work area, we business. The contest has been annually anno- priorities are not only a promise, but we have implement various development and training unced by the Union Insurance company since been fulfi lling them with real activities througho- activities for them, contributing to completing 2010, within the framework of “Initiative for ut the year. and expanding of their knowledge and ski- Healthier Slovakia” project. This is also a pro-

46 47 2016 Annual Report Chapter 6

Benefi ts Orange, consider it important to pay attention to this issue and to focus on this area through Employee Placement In addition to all these activities, we have conti- specifi c activities and access to our employees. nued in providing a wide range of benefi ts. Our We are therefore pleased that we have obtained benefi t and social policy has been long very the International European Certifi cate of Gen- highly appreciated by the employees at Orange. der Equality. Orange also became part of the initiative of Orange Group called GEE & IS Audit Bratislava 61 % The goal of all our human resources management - The Gender Equality European and Internatio- activities is to make the number of employees nal Standard. The objective of the audit was to Banská Bystrica 32 % who positively speak of the company and asso- examine whether we are an employer contribu- Košice 2 %

ciate their future with it, as great as possible. ting to a culture that supports gender equality Ivanka pri Dunaji 3 % and diversity in terms of age or gender. The au- Nitra 1 % dit assessed the equality in the areas of wage Prievidza 1 % Diversity Policy policies, career opportunities, education, the ba- lance between private and working life and other The equality of gender opportunities is beco- initiatives that promote the fair treatment of all In 2016, on average, 1,101 employees has been working at Orange, within ming an increasingly discussed topic. We at groups of employees. the branch offi ces.

48 49 7 Corporate Social Responsibility

We feel the need to protect what we care about and to develop what is beautiful 2016 Annual Report Chapter 7

Corporate Social Responsibility

Orange is one of the leaders in the telecom- and large businesses for corporate social Policy of quality, environment, health and safety maximum safety and health at work for each munications market applying the principles responsibility and corporate philanthropy. at work is a basic document to which we commit of our employees. One of the inseparable areas of of corporate social responsibility to custo- in control and management of the development OHS management is the involvement of our sup- mers, employees, partners and communities. Orange as a Trustworthy Entity of our business activities, in providing quality ser- pliers in the system to ensure such protection, The strategy of the corporate social responsi- vices and networks to our customers. In practice, but also the application of measures on those bility of Orange is to create a balance between One of the most important pillars of corporate we are able to implement this policy, also thanks who are present on the company's premises, the needs of partners, the company, its custo- social responsibility of Orange, is a system of au- to the introduction and continual improvement or just visiting. That is why we introduced new mers, shareholders and employees, and diting and reporting. It sets the “mirror” in which of the quality management system, environmen- rules on health and safety, also fi re protection for implement changes that support the long-term we can refl ect how we operate in individual are- tal management system and occupational health visitors and suppliers of works and services. sustainability of our business. We believe, only as. Regular monitoring and evaluation allows us and safety management. All of that in accordan- that way of doing business which respects and to examine the functions and compliance with ce with international standards ISO 9001, ISO Ethical principles are not just a set of rules that balances the business goals of the company business principles in practice. For each prin- 14001 and OHSAS 18001, and with the active are described in the Code of Ethics or on the and its impact on society, is sustainable. ciple we have a defi ned framework of factors, participation of all employees. company intranet, but they are strictly applied so called indicators that have been developed in in practice. We regularly educate employees We are a founding member of the Business accordance with the rules of best practice and We have implemented and certifi ed occupatio- on ethics, we try as widely as possible to en- Leaders Forum association which brings based on our practical experience. In co-opera- nal safety and health (OSH) management in line courage ethical thinking. New employees are together leaders to promote corporate social tion with the Orange Group, we have successfully with the OHSAS 18001 standard since 2011. We required to familiarise themselves with the Code responsibility principles in Slovakia. It is im- implemented a comprehensive software tool – have gained the opportunity to effectively iden- of Conduct and Ethics and undertake e-learning. portant for us to promote the involvement of INDICIA, that allows us to effi ciently input, control tify and assess the risks of health and safety in If the employee wishes to draw attention to companies and spread the ideas of corporate and assess the specifi ed indicators of corporate our workplaces and subsequently manage and a violation of ethics, he/she, in addition to the social responsibility. Therefore, we again social responsibility. We implement the gathering eliminate risk, as well as to improve perfor- standard contacts, such as a superior or the became a major partner of the Via Bona of environmental indicators quarterly, and gathe- mance and achieve compliance with OSH legal ethics counsellour, can also anonymously con- Slovakia Award in 2016, rewarding the small ring of social indicators on an annual basis. requirements. All this with one goal, to achieve tact directly the parent Orange company via

52 53 2016 Annual Report Chapter 7

letter or email within the so-called “anonymous ness operations, values, good name and the force these basic principles throughout its sphere by 20 %. CO2 largely has to do with power con- whistle-blowing mechanism”. reputation of our company. In each country, of competence, in accordance with the Annex to sumption. To achieve this goal, we conduct a special committee for compliance (Complian- the Contract stipulating to comply with all appli- various activities, from the introduction of au- For the purpose of verifying of complaints, Board ce Committee) is appointed for the enforcement cable legislation in Slovakia, EU and international tomatic shutdown of computers after working of Orange Slovakia, a.s. appointed a respon- of these rules and policies. Similarly, we care standards for ethical and responsible behaviour, hours, to the optimizing of technological areas. sible person. A process for reporting complaints about the ethics in business with our business in particular the rules, concerning human rights, Solutions that contribute to this objective are ap- and the conditions of their screening is also re- partners. We prefer partners certifi ed in the- environmental protection, sustainable develop- plied in the operation of our networks , there are gulated by company-wide procedure. The Code ir fi eld. Of course, we prefer them to comply ment, bribery and corruption. new base stations using solar energy for their of Ethics also makes it clear Orange does not with regulations and standards applicable in the operation, currently we have 34 of them Slovakia, tolerate corruption. A procedure called "Control European Union and that their business We Support Green Activities and that number will continue to increase. The environment to prevent fraud and the anti-fraud is ethical and in compliance with applicable introduction of online monitoring of energy policy" emphasizes the zero tolerance of our so- laws of the Slovak Republic. In contributing to long-term sustainable develop- networks helps to achieve the stated objective. ciety to fraud and contains a section dealing with ment, environmental activities are an integral part Within this, we follow the energy parameters of corruption. Following the Code of Ethics of Orange In addition, however, we perform an extended of our business. Although as a telecommunica- each device. By optimization of the air condi- Group our company approved the document of assessment of selected suppliers with a focus tions operator we do not have such a signifi cant tioner for base stations for example, we saved the Anti-corruption Policy back in 2012. on safety and the environmental impact of their impact on the environment, as in some other around 1.4 GWh of electricity. business activities, as well as on some aspects sectors, the energy consumption is an area The working group for "Compliance" within the of the business that are sensitively perceived by which has the most signifi cant impact, amongst Minimum of Paper Orange Group aims to keep an oversight of our a global community (for example, abuse of child our activities. Therefore we implement systema- Digitization of the greatest possible amount obligations related to the policy of combating labour). The suppliers Code of Conduct applies tic changes and projects that allow us to reduce of work is also one of the areas through which fraud, corruption, ethics, money laundering and to all purchasing activities managed by Orange. energy consumption. In 2006, we have commit- we support the fulfi llment of our commitments

other risks that could have an impact on busi- We expect our suppliers to comply with, and en- ted that by 2020 we will reduce CO2 emissions in the environmental fi eld. In the past year we

54 55 2016 Annual Report Chapter 7

have achieved, that more than three quarters of ater comfort and faster customer equipment, the Slovak market. Achieving that result, we We Educate and Support a million of our customers with a plan, use the also increased security, and considerable envi- managed to avoid about 5.8 tons of electrical Technologies are no longer just an everyday benefi ts of electronic invoices. Their share ronmental benefi ts. In 2016 the branch digitally waste ending up in municipal waste. In 2016, part of our business, but also part of the lives reached more than 68 % of the customer base. signed nearly 2.5 million documents. In the sum- we also managed to take back about 1.05 of our customers. They bring users a number In addition to the benefi ts for the customer of mer of last year, 2016, we also launched the digital tons of batteries from mobile phones, and their of positives to life, but also they mean new ris- comfortable and clear archiving, and searches signature courier delivery service. The customer ecological destruction has an equally positive ks that were not there before. It is therefore very in invoices, we also reduce the amount of paper can confi rm receipt of the consignment delive- impact on the environment. One of the most important that people can use the most advan- consumption. red, directly by the signature on the tablet. In less important activities in this area, is the traditional ced digital technologies responsibly. For many than six months, this option was used by more competition in collecting old mobile phones. years, we have focused on training for parents, Through innovative solution, our customers can than 5,000 customers and it represents approxi- One useful project combines the environmental teachers as well as children themselves in this use the electronic biometric signature “eSign” mately 200,000 saved pages in print. and charitable elements. For each mobile area. In particular, parents are a target group, to sign contracts and validate other documen- phone handed in, Orange dedicated 50 cents and we help them overcome the digital gap tation. The technology is capable of capturing We Collect and Dispose to selected non-profi t organizations. So, thanks between them and their children as well as how all the data guaranteeing the uniqueness of the in an Environmentally Friendly Manner to its customers, Orange donated about 30 to recognize and avoid risks that technology signatory and the safety of the process, from Since the connection of Orange and mobile thousand EUR to non-profi t organizations. brings. the signing recognized by your own hand on phones is very tight, it is logical for us that an electronic pad. The result of this solution is we are interested in where the equipment will With the same objective, to be responsible to the Since 2006, we have devoted intensive promo- a signifi cant reduction in the cost of scanning, fi nish after the end of its life and use. Therefore, environment, we also expanded the separate tion of safe and responsible use of information processing and archiving of documentation, we have long implemented collections of collection of paper and plastic bottles in our and communication technology /ICT/. In co- mailing costs, and the like. Customers are sent mobile phones which we connect with other own stores, offi ce buildings and archives. In -operation with many experts we carry out free signed documents by e-mail and plus is a clear socially benefi cial activities. Overall, in 2016 we 2016, this amounted to 67.6 tons of separated workshops and information and educational acceleration of equipment requirements at collected 58,493 mobile phones, accounting paper and 1.5 tons of plastic bottles. activities to help parents, teachers and children any point of sale. A solution that delivers gre- for 15.86 % of total mobile phones we put on to fi nd their own ways to use the benefi ts of ICT

56 57 2016 Annual Report Chapter 7

and, at the same time, protect children from support activities or through the Orange the collection of clothes, donating blood or the Nadácia Orange (Orange Foundation) the dangers of the online world. The website Foundation. implementation of their own projects and ideas. - Changing the World to a Better Place www.detinanete.sk is the platform for a com- Again, we joined our forces with the National Nadácia Orange systematically and long-term prehensive approach to information, tips, In 2016, we again helped, via mobile fund- Transfusion Centre and 115 of our employees directs its support in the areas of education, com- advice from professionals, various playful tests, raising, through which we managed to collect donated more than 40 litres of blood last year. munity development and support of less well of inspiration and advice from a child psycholo- more than 720 thousand EUR. With our long- In carrying out their projects supported through groups. Therefore, in addition to grant programs gist. We continued to discuss this topic in the term partners, Friends of Unicef Children, the “Employee Grant Program” 22 colleagues it develops long-term partnerships with NGOs free workshops program in schools in which Magna - Children in Need, and Good Angel, dedicated their time and effort for a good cause. and with their help it fulfi lls its mission and helps professional instructors provided 318 lectures by way of the DMS system or through one- This gave rise to a number of inspirational tools make the world a better place for all. The foun- and 5,770 students and 595 parents were tra- off donors' contributions in collections, which for children, and the playgrounds or community dation reallocated more than 700 thousand EUR ined through them in Slovakia last year. At the we implemented in 2016 with 22. The money spaces got the long expected new “coat”, etc. last year and supported 553 community pro- end of 2016 we helped our customers by in- always migrates to the aid foundations in full. Through collections of clothing carried out jects. There were grant programs implemented troducing the “Family Safety Package” that by Orange in 2016, employees devoted more to promote useful ideas to help community de- includes the Parental Control application from Orange continues to provide individual special than 400 kg of clothes. Collected clothing thus velopment, volunteering and fi nding common ESET. discounts for services to customers with severe supported fi ve non-profi t organizations that solutions to local or social problems. Through disabilities or non-profi t organizations. care for people in need. Every year, we get program “e-Schools for the Future” it supported We Get Involved also involved in the largest corporate volunteer projects to promote responsible and safe use of Support from Our Own Sources event in Central Europe “Our City” which could ICT by children, implemented in primary and se- Orange, in addition to its main business, is The fact that Orange has always been eager to be attended by the active employees during condary schools. Under the popular program interested, and gets involved in where it can be help is evidenced by the desire of employees their working hours. “Give Christmas” the foundation reallocated EUR helpful. Whether through fundraising, various to engage in charitable activities, for example, 86,892 between requests for Christmas support,

58 59 2016 Annual Report Chapter 7

and again with the contribution of Orange custo- In 2016, the Orange Foundation Award, which activities (Truc sphérique, civic association) or mers. For each plan, Internet, TV or other service is a unique appreciation of its kind in Slovakia, for providing comprehensive, integrated social that the customer bought in Orange from 28 Octo- was awarded for the seventh time. Its aim is to services targeting mainly the Roma community ber to 28 November 2016, Orange contributed 50 acknowledge the work of non-governmental (ETP Slovakia - Centre for sustainable development, cents to the “Give Christmas” grant program. organizations for their outstanding contributions. civic association). The special award called "The A total of nine of such organizations received the Prize for Personality for Civic Engagement" went to In co-operation with the Aliancia Stará tržnica, award, annually awarded in the fi elds of education, Mr Ivan Ježík for long-term operation and search civic association, Connect and Orange Found- community development and social inclusion. for innovative solutions in the fi eld of education. ation, we inaugurated a new creative community An independent evaluation committee awarded The public was involved in the vote for the fi rst time space "Lab" powered by Nadácia Orange on March three organizations in each category, not only and announced the winner of the Prize of Public – 14, 2016, where students, young professionals, morally but, also fi nancially. The foundation re- STROM (The Tree – civic association). and the general public can meet and gather new allocated a total fi nancial support amounting to digital skills. Since its opening and the end of last EUR 53,000 amongst the winners. Last year, an More information about Corporate Social Res- year, there were 76 workshops on various topics exceptional award along with a cash prize was ponsibility activities of Orange and Nadácia carried out attended by 212 people in total. The given to the organization dealing with, for example, Orange (Orange Foundation) can be found on Lab has so far 146 members, who regularly create improving the social skills of children in primary www.orange.sk and www.nadaciaorange.sk. there, and provide a base for the general public, schools (League for Mental Health Slovakia, civic who comes there for lectures. association) or creating inspiring public spaces designed to implement various community

60 61 8Financial Statement We work to make our results speak for us 2016 Annual Report Chapter 8

Table of Contents

Independent Auditor´s Report...... 66

Separate Statement of Financial Position ...... 68

Separate Statement of Comprehensive Income ...... 70

Separate Statement of Changes in Equity ...... 71

Separate Statement of Cash Flows ...... 72

Notes to the Separate Financial Statements ...... 74

Orange Slovensko, a.s.

INDEPENDENT AUDITOR’S REPORT AND SEPARATE FINANCIAL STATEMENTS (prepared in accordance with International Financial Reporting Standards as adopted by the EU) Year ended 31 December 2016

Company identifi cation number: 35 69 72 70 Tax identifi cation number: SK2020310578

64 65 2016 Annual Report Chapter 8

Independent Auditor’s Report

66 67 2016 Annual Report Chapter 8

Separate Statement of Financial Position as at 31 December 2016

In thousands of EUR Note 31 December 2016 31 December 2015 In thousands of EUR Note 31 December 2016 31 December 2015

Assets Equity and liabilities

Non-current assets Equity 12 Property, plant and equipment 4342,830338,701 Share capital 39,222 39,222 Intangible assets 5 162,243 179,992 Reserves 15,260 15,260 Investments in unconsolidated subsidiaries 6 106 106 Retained earnings 128,896 155,565 Non-current receivables 8,869 6,889 Profi t for the year 81,700 88,249 Other non-current assets 31 84 Total 265,078 298,296 Total 514,079 525,772 Non-current liabilities Current assets Provisions 14 28,626 29,624 Inventories 8 15,691 20,493 Long-term debt/loan 13 210,000 110,000 Trade and other receivables 9 65,715 57,944 Deferred tax liabilities 7 5,689 4,358 Other assets 4,293 5,205 Non-current payables 14 17,050 18,616 Current fi nancial assets 10 21,834 - Total 261,365 162,598 Current income tax receivable 3,347 3,766 Current liabilities Cash and cash equivalents 11 6,090 5,509 Current fi nancial liabilities 10 - 36,582 Total 116,970 92,917 Trade payables and other liabilities 15 83,721 101,000 Total assets 631,049 618,689 Provisions 1411 Deferred income 16 20,884 20,212 Total 104,606 157,795

Total equity and liabilities 631,049 618,689

68 69 2016 Annual Report Chapter 8

Separate Statement of Comprehensive Income Separate Statement of Changes in Equity for the Year ended 31 December 2016 for the Year ended 31 December 2016

In thousands of EUR Note 2016 2015 In thousands of EUR Note Share capital Reserves Retained earnings Total

Revenues 17 551,898 560,623 Balance as at 1 January 2015 39,222 15,260 363,191 417,673 Application of new accounting External purchases 18 (293,464) (289,392) –– 2,374 2,374 policy on capitalization of SIM cards Other operating expenses 19 (16,174) (16,586) Balance as at 1 January 2015 39,222 15,260 365,565 420,047 Other operating income 19 14,926 7,962 adjusted Wages and contributions 20 (46,354) (45,779) Amortisation and depreciation expenses (97,622) (95,814) Total comprehensive income for the year Profi t for the year – – 88,249 88,249 Operating profi t113,210121,014Transactions with shareholders Dividends paid – – (210,000) (210,000) Interest income 73 128 Balance as at 31 December 2015 39,222 15,260 243,814 298,296 Interest expenses (2,162) (1,602) Other fi nance expenses (174) (212) Balance as at 1 January 2016 39,222 15,260 243,814 298,296 Other fi nance income 26 37 Total comprehensive income for the year Profi t before tax 110,973 119,365 Profi t for the year – – 81,700 81,700 Share based plan – – 82 82 Income tax 21 (29,273) (31,116) Transactions with shareholders Profi t for the year 81,700 88,249 Dividends paid – – (115,000) (115,000) Other comprehensive income - - Balance as at 31 December 2016 39,222 15,260 210,596 265,078

Total comprehensive income for the year 81,700 88,249

Total comprehensive income attributable to: Owners of the Company 81,700 88,249

70 71 2016 Annual Report Chapter 8

Separate Statement of Cash Flow for the Year Ended 31 December 2016

In thousands of EUR Note 2016 2015 In thousands of EUR Note 2016 2015

Profi t for the year 81,700 88,249 Investing Activity

Taxes 29,273 31,116 Purchase of property, plant and equipment (84,203) (85,903) Financial income -- Proceeds from sale of non-current assets 8,523 1,147 Interest expenses 2,163 1,601 (Increase) in fi nancial assets (21,834) - Interest income (72) (127) Net cash outfl ow from investing activities (97,514) (84,756) Depreciation and amortisation of tangible and intangible assets 97,621 95,814 (Decrease)/Increase in provisions (1,260) 927 Financing Activity Decrease in value adjustment to receivables (8,445) (2,246) (Decrease)/Increase in value adjustment to inventories (16) 316 Changes in current fi nancial liabilities 10 (36,582) 30,132 Gain on sale of property, plant and equipment (8,322) (865) Increase in long-term loan net of arrangement fees 13 100,000 109,286 Other -- Dividends paid 12 (115,000) (210,000) Share based compensation 83 - Net cash outfl ow from fi nancing activities (51,582) (70,582) Profi t from operating activities before changes in working capital 192,725 214,785 (Increase)/Decrease in trade and other receivables Net increase /(decrease) in cash and cash equivalents 581 (2,066) (413) 1,351 (including accruals/deferrals of assets) Decrease/(Increase) in inventory 4,818 (9,031) Cash and cash equivalents at the beginning of the year 5,509 7,575 Increase/(Decrease) in trade liabilities (18,740) (20,155) (including accruals/deferrals of liabilities) Cash and cash equivalents at the end of the year 11 6,090 5,509 Cash generated from operations 178,390 186,950 Interest received 35 Interest paid (1,193) (551) Taxes paid (27,523) (33,132)

Cash fl ows from operating activities 149,677 153,272

72 73 2016 Annual Report Chapter 8

Notes to the Separate Financial Statements for the Year Ended 31 December 2016

1. General Information Members of the Company’s Bodies

Body Function Name Orange Slovensko, a.s. (hereinafter also referred tablishment and operation of public mobile to as the “Company”) is a joint stock company telecommunication networks at assigned frequ- Chairman and Chief Executive Offi cer Pavol Lančarič Deputy Chairman Ladislav Rehák established on 29 July 1996 and incorporated encies as well as the operation of fi bre-optic Member and ITN Director/CEO deputy Ivan Golian Board of Directors on 3 September 1996 with its registered offi ce cable networks. The Company is not an unlimi- Member and CFO/CEO deputy Antoine Guillaume Guilbaud at Metodova 8, 821 08 Bratislava, Slovak ted guarantor in any other entity. Member Zuzana Nemečková Member Marc Ricau Republic. In August 2008, Atlas Services Member Christophe Naulleau Belgium, S.A. acquired all the shares held by Approval of the 2015 Financial Statements Member Mai Céline Pavret de La Rochefordiere Wirefree Services Nederland B.V., which had On 3 June 2016, the General Meeting approved Member (until 13 June 2016) Adela Irinel Savu Guedon Member (until 13 June 2016) Ján Kodaj been the major shareholder since Novem- the Company’s 2016 fi nancial statements Supervisory Board Member (until 13 June 2016) Rudolf Tesár ber 2005, when it acquired all the shares held (Notary Deed No. N 108/2016, Nz 20000/2016, Member (since 14 June 2016) Bruno Duthoit by minority shareholders and became the NCR1s 20577/2016). Member (since 14 June 2016) Ľuboš Dúbravec Member (since 14 June 2016) Francis Gelibter 100% shareholder of Orange Slovensko, a.s. Member (since 14 June 2016) Štefan Hronček The Company’s principal activity is the es-

Employees

31 December 2016 31 December 2015 Number of employees as at 1,113 1,087 Of which: managers 112 113 Average number of employees 1,099 1,077

74 75 2016 Annual Report Chapter 8

2. Adoption of New and Revised Standards

In the current year, International Accounting Amendments to IFRS 10 “Consolidated Fi- Amendments to IAS 16 “Property, Plant and ent amendments (effective for annual periods Standards Board (IASB) and the International nancial Statements”, IFRS 12 “Disclosure of Equipment” and IAS 41 “Agriculture” - Agricul- beginning on or after 1 January 2018) Financial Reporting Interpretations Committee Interests in Other Entities” and IAS 28 “In- ture: Bearer Plants (effective for annual periods (IFRIC) of the IASB have not issued any new or vestments in Associates and Joint Ventures” beginning on or after 1 January 2016) IFRS 15 “Revenue from Contracts with Custo- revised standards or interpretations that could - Investment Entities: Applying the Consoli- mers” (effective for annual periods beginning be relevant to the Company’s operations for ac- dation Exception (effective for annual periods Amendments to IAS 27 “Separate Financial on or after 1 January 2018) counting periods beginning on 1 January 2016. beginning on or after 1 January 2016) Statements” - Equity Method in Separate Financial Statements (effective for annual peri- IFRS 16 “Leases” (effective for annual periods (a) Standards and interpretations adopted by Amendments to IFRS 11 “Joint Arrangements” ods beginning on or after 1 January 2016) beginning on or after 1 January 2019) EU effective in 2016 but not relevant to the – Accounting for Acquisitions of Interests in Company’s operation Joint Operations (effective for annual periods IFRS 14 “Regulatory Deferral Accounts” (ef- Amendments to IFRS 2 “Classifi cation and The following standards, amendments, and in- beginning on or after 1 January 2016) fective for annual periods beginning on or after Measurement of Share-based Payment tran- terpretations adopted by the EU are mandatory 1 January 2016) sactions” (effective for annual periods begin- for accounting periods beginning on or after Amendments to IAS 1 “Presentation of Finan- ning on or after 1 January 2018) 1 January 2016 but are not relevant to the Com- cial Statements” - Disclosure Initiative (effective (b) Standards, interpretations, and amendments pany’s operation: for annual periods beginning on or after 1 Ja- to the existing standards and interpretations Amendments to IFRS 10 “Consolidated Financial nuary 2016) adopted by the EU but not yet effective Statements” and IAS 28 “Investments in Asso- Amendments to IFRS 10 “Consolidated Finan- At the date of authorisation of these fi nancial sta- ciates and Joint Ventures” - Sale or Contribution cial Statements” and IAS 28 “Investments in Amendments to IAS 16 “Property, Plant and tements, the following standards, revisions, and of Assets between an Investor and its Associate Associates and Joint Ventures” - Sale or Con- Equipment” and IAS 38 “Intangible Assets” interpretations adopted by the EU had been is- or Joint Venture (effective for annual periods be- tribution of Assets between an Investor and its - Clarifi cation of Acceptable Methods of Depre- sued but were not yet effective: ginning on or after a date to be determined) Associate or Joint Venture (effective for annual ciation and Amortisation (effective for annual periods beginning on or after 1 January 2016) periods beginning on or after 1 January 2016) IFRS 9 “Financial Instruments” and subsequ- Amendments to IAS 7 Disclosure Initiative

76 77 2016 Annual Report Chapter 8

(effective for annual periods beginning on or its allocation between the handset sold and This standard will mainly change the lease ac- net equity will be reduced at the beginning of the after 1 January 2017) the communication service will differ and thus counting for lessees with the recognition of an arrangement (due to the acceleration of expen- also revenue split between particular years will asset and a liability which represents the right of ses attributable to the interest component) and Amendments to IAS 12 “Recognition of Defer- change. The resulting acceleration of the de- use at the delivery date granted by the lessor. the intangible and tangible assets as well as the red tax assets for unrealised losses” (effective vice revenue recognition would lead to the re- lease liability will increase. for annual periods beginning on or after 1 Ja- cognition of a contract asset in the statement of As a consequence, it will impact the presenta- nuary 2017) fi nancial position which would be settled again- tion of the income statement (depreciation and Thus, the standard introduces a new basis for st the communication service revenue during the interest expense instead of rental expense) and splitting supplier arrangements based on a new The Company anticipates that adopting the- contract commitment period. Except for this dif- the statement of cash fl ows (interest expense will accounting defi nition of a lease and a service ar- se standards and amendments to the existing ference in the statement of fi nancial position, the only impact the operating cash fl ows whereas rangement. standards and interpretations will have no revenue recognition of a bundled offer will be si- the debt repayment will affect the fi nancing cash material impact on the Company’s fi nancial milar to that of a deferred payment equipment fl ows). In the statement of fi nancial position, the statements in the period of initial application sale and a separate communication service. except for the standard IFRS 15 and IFRS 16. 3. Signifi cant Accounting Policies Commissions (i.e. payments to distributors directly IFRS 15 standard relates to revenue recogni- attributable to an obtaning a contract,) will be re- (a) Statement of Compliance Accounting No. 431/2002 Coll. on Accounting, as tion and is applicable on a retrospective basis cognized over the contract commitment period. The separate fi nancial statements have been pre- amended. The fi nancial statements were prepa- either limited to the cumulative effect of the new pared in accordance with IFRS as adopted by the red for the reporting period from 1 January 2016 method at the opening date of the annual re- The future implication of the standard is currently EU and on the going concern assumption. IFRS to 31 December 2016 in accordance with IFRS as porting period that includes the date of initial being evaluated and will be applied in accordan- as adopted by the EU do not currently differ from adopted by the EU. The Company elected to use application (January 1, 2018) or by adjusting the ce with the requirements in 2018. IFRS as issued by the IASB, except for certain the exemption from consolidation in accordan- reported comparative periods. standards and interpretations that have not been ce with the 7th Directive of the EU as well as with IFRS 16 standard relates to the accounting for endorsed by the EU as described above. IAS 27.10 and not to present consolidated fi nan- For the Company, this standard would mainly leases and will be compulsory applicable from cial statements (with its 100 % owned subsidiary impact the accounting for bundled offers which January 1, 2019 or on a retrospective basis from (b) Legal Framework for Preparing the Financial Orange CorpSec, spol. s r.o.), which is also incor- include a handset component with a subsidised January 1, 2018. It is retrospective either at the Statements porated into the Act on Accounting No. 431/2002 price and a communication service compo- fi rst application date or at the opening date of the These fi nancial statements are the Company’s se- Coll. on Accounting, as amended. These fi nancial nent: the cumulative revenue will not change but reported comparative period. parate fi nancial statements prepared under Act on statements are intended for general use and infor-

78 79 2016 Annual Report Chapter 8

mation; they are not intended for the purpose of are translated into euro using the exchange rate Items of property, plant, and equipment are embodied with the item will fl ow to the Compa- any specifi c user or for the consideration of any of the day prior to the transaction date. Monetary accounted for on a component-by-component ny and the cost of the item can be measured specifi c transaction. Accordingly, users should assets and liabilities denominated in foreign cur- basis at a level that allows for the depreciation reliably. All other costs are recognised as an ex- not rely exclusively on these fi nancial statements rencies are translated at the exchange rate valid of each component over its expected useful life pense when incurred. when making decisions. on the balance sheet date. The exchange rate and allows the proper accounting of asset dis- differences upon translation are charged to the posal and withdrawal. Depreciation Orange SA (France), the Company’s ultimate pa- result for the period. Non-monetary assets and Depreciation is charged to the income statement rent company and the ultimate controlling party, liabilities denominated in foreign currencies that Subsequent Expenditure on a straight-line basis over the estimated useful prepares consolidated fi nancial statements in are stated at fair value are translated into euro at The Company recognises in the carrying life of each category of an item of property, plant, accordance with IFRS as adopted by the EU for a the foreign exchange rates valid on the dates on amount of an item of property, plant, and equ- and equipment. Land is not depreciated. Depre- group of companies, which also includes Orange which the fair value is determined. ipment the additional costs or cost of replacing ciation starts when the assets are ready for their Slovensko, a.s. and its subsidiary Orange CorpSec, part of such an item when that cost is incurred if intended use. The estimated useful lives for the spol. s r.o. (e) Property, Plant and Equipment it is probable that the future economic benefi ts current and comparative periods are as follows: Owned Assets 2016 2015 The consolidated fi nancial statements of Orange Items of property, plant and equipment are SA are available at its registered offi ce at 6 Place stated at cost, less accumulated depreciati- Radio Access Network 5 to 28 years 5 to 28 years Transmission 6 to 30 years 6 to 30 years d’Alleray, 75015 Paris, France. on and impairment losses, if applicable. Cost Switching 5 to 10 years 5 to 10 years consists of the price at which the asset was Data Network 4 to 5 years 5 years (c) Basis of Preparation acquired plus the costs related to the acquisi- Dedicated Platforms 5 years 5 years Other Network 5 to 10 years 5 to 10 years The fi nancial statements are presented in eu- tion (installation and commissioning, transport, IT Non-Network Hardware & Infrastructure 2 to 5 years 2 to 5 years ros, rounded to the nearest thousand. They are assembling cost, etc). The cost of self-con- Buildings 10 to 30 years 10 to 30 years Other Non-Network Equipment 2 to 10 years 3 to 10 years prepared on the historical cost basis. The prin- structed assets includes the cost of materials, Local Loop 10 to 30 years 10 to 30 years cipal accounting policies are included in the direct labour, the initial estimate (where relevant) SIM Cards 5 years 5 years paragraphs below. of the costs of dismantling and removing the items and restoring the site on which they are (d) Foreign Currency located, and an appropriate proportion of pro- Foreign Currency Transactions duction overheads. SIM cards are capitalized as Transactions denominated in foreign currencies an item of property, plant and equipment.

80 81 2016 Annual Report Chapter 8

The useful lives of property, plant and equipment The license fees and the spectrum fees are they become available for use, using the strai- The recoverable amount of other assets is the are reassessed annually by Orange SA, which capitalized as intangible assets and amortized ght-line method over the following estimated greater of their net selling price and the value in results in changes to the useful lives of certain as- over the license period. The administrative fees useful lives: use. In assessing value in use, the estimated future sets. These changes are recorded as changes in are expensed. cash fl ows are discounted to their present value 2016 2015 the accounting estimates on a prospective basis. using a pre-tax discount rate that refl ects current Software 3 to 10 years 3 to 10 years Capitalisation of Spectrum Fees market assessments of the time value of money Licences 10 to 16 years 10 to 16 years At the Company level, the revision of an individu- Spectrum fees are the unavoidable payments and the risks specifi c to the asset. For an asset al asset’s useful life is performed when indicators computed on the principle of allocated The useful lives of intangible assets are that does not generate largely independent cash of an earlier end of life exist. bandwidth and fi x tariff for the whole period to reassessed annually by Orange SA, which infl ows, the recoverable amount is determined which a license is granted. Payment is done on results in changes to the useful lives of certain for the cash generating unit to which the asset (f) Intangible Assets a quarterly basis during the whole license period. assets. These changes are recorded as changes belongs. Intangible assets acquired separately by the in accounting estimates on a prospective basis. Company are stated at cost less accumulated The Company discounts the value of future (h) Investments in Subsidiaries amortisation and impairment losses if applicable. spectrum fees to their present value and At the Company level, the revision of an individual Investments in subsidiaries represent invest- Intangible assets mainly comprise software and recognizes them as other intangible assets. asset’s useful life is performed when indicators ments in wholly-owned subsidiaries: Orange licences for operating the telecommunication Related future spectrum fees payables are of an earlier end of life exist. CorpSec, spol. s r.o. with the seat on Metodova 8, network. presented as both current and non-current 821 08 Bratislava, Slovakia and Nadácia Orange liability. (g) Impairment of Assets (“the Foundation”), having the seat on Metodova Telecommunication licenses The carrying amounts of the Company’s assets 8, 821 08 Bratislava. The Company’s investments Upon the granting of the telecommunication li- Subsequent Expenditures are reviewed at each balance sheet date to have been accounted for at cost. censes (GSM, UMTS, LTE) Orange Slovensko, Subsequent expenditures on capitalised in- determine whether there is any indication of a.s. is obliged to pay to the Telecommunication tangible assets are capitalised only when they impairment. If such indication exists, the asset’s (i) Inventories Office one off license fee and two types of increase the future economic benefi ts embodied recoverable amount is estimated. An impairment Inventories are stated at the lower of cost and the recurrent fees: in the specifi c assets to which they relate. All loss is recognised whenever the carrying amount net realisable value. The net realisable value is other expenditures are expensed as incurred. of an asset or its cash-generating unit exceeds the estimated selling price in the ordinary course Administrative variable fees its recoverable amount. Impairment losses are of business, less the estimated costs necessary Amortisation recognised in the income statement. for completing the sale and selling expenses. Spectrum fixed fees Intangible assets are amortised from the date

82 83 2016 Annual Report Chapter 8

The cost is based on the weighted average (less than 50 % on average) while the probability receivables’ (2015: only trade receivables cate- provisions are determined by discounting the principle and includes expenditures incurred in is assessed on the basis of an individual contract gorised as ‘loans and receivables’). expected future cash fl ows at a pre-tax rate that acquiring the inventories and bringing them to level. The Company considers contractual penal- refl ects current market assessments of the time their existing location and condition. ties as contingent assets. (m) Financial Liabilities value of money and, where appropriate, the ris- Financial liabilities, including borrowings, are ks specifi c to the liability. The Company records (j) Trade Receivables The application of the new accounting policy has initially measured at fair value, net of transac- a provision for asset retirement, a provision for The trade receivables are mainly short-term with no impact on the reported Statement of Income tion costs, and are subsequently measured at retirement benefi t cost and a provision for litiga- no stated interest rate and are measured at fair and retained earnings as the receivables from amortised costs using the effective interest rate tions (see Note 14). value, subsequent to initial recognition they are contractual penalties were offset by a 100 % im- method, with interest recognised on an effecti- stated at their amortized costs using the effective pairment provision in the past. ve yield basis. The Company’s fi nancial liabilities (p) Trade and Other Payables interest rate method, less provisions for any impa- relates to overdraft on the current account held Trade and other payables are stated at cost. irment of the receivables. (k) Cash and Cash Equivalents by parent company Orange SA as at 31 Decem- Cash and cash equivalents consist of balances ber 2015 and long term loan received from the (q) Revenues Those receivables which include deferred pay- with banks, and highly-liquid investments with parent company. The Company provides mobile and non-mo- ment terms over 12 up to 24 months for the insignifi cant risk of changes in value. bile communication services to individuals benefi t of customers who purchased handsets are (n) Borrowing Cost and commercial and non-commercial orga- discounted and classifi ed as according to their (l) Financial Assets All borrowing costs are recognised in profi t or nisations. The Company generates revenue remaining maturities. A provision for impairment Financial assets are classifi ed into the following loss in the period in which they are incurred. As primarily by providing digital wireless services of trade receivables is established when there specifi ed categories: fi nancial assets as ‘at fair the Company does not have any loans dedicated for voice and data as well as value-added ser- is objective evidence that the Company will not be value through profi t or loss’ (FVTPL), ‘held-to- to investment activities, there are no borrowing vices, text, and multimedia messaging. To a able to collect all amounts due according to the -maturity investments’, ‘available-for-sale’ (AFS) costs eligible for capitalisation. lesser extent, Orange Slovensko a.s. genera- original terms of the receivables (see Note 9). fi nancial assets and ‘loans and receivables’. The tes revenue from the sale of wireless handsets, classifi cation depends on the nature and purpo- (o) Provisions including laptops and tablet computers. Contractual Penalties se of the fi nancial assets and is determined at the A provision is recognised when the Company The Company recognize the contractual penal- time of the initial recognition. As at 31 Decem- has a legal or constructive obligation as a re- The Company recognises mobile usage and ties at the moment of collection based on the ber 2016, the Company holds trade receivables sult of a past event, and it is probable that an roaming service revenues based upon the historical data analysis showing that the proba- and current cash-pool account held by parent outfl ow of economic benefi ts will be required traffic processed or contracted fee schedules bility of contractual penalties collection is low company Orange SA categorised as ‘loans and to settle the obligation. If the effect is material, when the service is rendered. Revenues due

84 85 2016 Annual Report Chapter 8

from foreign carriers for international roaming Other service revenues are recognised when pect of previous years. Taxable profi t differs from The amount of deferred tax provided is based on calls are included in revenues in the period in delivered and accepted by customers and profi t as reported in the separate income sta- the expected manner of realisation or settlement which the call occurs. when services are provided in accordance tement because it excludes items of income or of the carrying amount of assets and liabili- with the contract terms. expense that are taxable or deductible in other ties, using the tax rates enacted or substantially Certain prepaid usage services are billed in years and it further excludes items that are never enacted at the balance sheet date including the advance, resulting in deferred income. Re- Revenue and related expenses associated taxable or deductible. special levy. A deferred tax asset is recognised lated revenues are recognised based on the with the wholesale of wireless handsets to only to the extent that it is probable that future usage or the expiry of the prepaid vouchers. distributors are recognised when the pro- Special Levy taxable profi ts will be available against which the ducts are delivered and accepted; as such, Special contribution made by a regulated entity asset can be utilised. Deferred tax assets are re- The Company enters into multiple element sales transactions are separate and distinct from activities in regulated industries. The base duced to the extent that it is no longer probable arrangements, which include the sale of from the sale of wireless services to custo- for the levy is the economic result reported for that the related tax benefi ts will be realised. handsets, activation fees, and service con- mers. the accounting period. The monthly levy rate is tracts to customers through Orange-branded 0.363 % for 2016 (0.726 % starting from 1 Janua- (t) Employee Benefi ts shops. These transactions include the sale (r) Expenses ry 2017, which will gradually decrease to 0.363 % Long-Term Service Benefits of a mobile handset, the up-front charge of Operating Lease Payments by 2021) from the operating profi t. The Company’s net obligation in respect of long- non-refundable activation fees to connect the For operating leases, lease payments are ex- -term service benefits is the amount of future customer to the service, and subsequently pensed on a straight-line basis over the lease Deferred Tax benefits that employees have earned in return monthly fees and airtime fees charged during period. Deferred tax is provided using the balance sheet for their service in prior periods. The obligation is the contract period. The Company considers liability method, providing for temporary differen- calculated using actuarial methods and discoun- each element delivered as a separately iden- (s) Taxation ces between the carrying amounts of assets and ted to its present value using a risk free interest tifiable component for the purpose of acco- Income tax expenses for the year comprise liabilities for fi nancial reporting purposes and the rate. The Company’s employee benefits contain unting of the transaction, as the handset or current and deferred tax and special levy. amounts used for taxation purposes. only retirement benefit. mobile service contract can be sold separate- ly. The Company allocates the consideration Current Income Tax of all elements based on the relative fair va- Current tax is the expected tax payable on the lue of each elements and recognize the first taxable profi t for the year, using tax rates enac- element delivered, i.e. the handset up to the ted or substantially enacted at the balance sheet price paid by the customer for the handset. date, and any adjustment to tax payable in res-

86 87 2016 Annual Report Chapter 8

4. Property, Plant and Equipment

Fixtu- Fixtures Land and Plant and Motor Under Land and Plant and Motor Under In thousands of EUR res and ARO *) Total In thousands of EUR and ARO *) Total Buildings Equipment Vehicles Construction Buildings Equipment Vehicles Construction Fittings Fittings

Cost Carrying amount

As at 1 January 2015 4,234 780,879 6,856 30,487 20,341 32,508 875,305 As at 1 January 2015 3,317 266,558 2,274 11,710 14,844 32,508 331,211 Additions - - - - 2,957 72,708 75,665 As at 31 December 2015 3,427 268,115 2,973 10,115 16,616 37,455 338,701 Disposals - (49,971) (3,271) (1,043) - - (54,285) Transfer 404 62,127 1,867 3,363 - (67,761) - As at 1 January 2016 3,427 268,115 2,973 10,115 16,616 37,455 338,701

As at 31 December 2015 4,638 793,035 5,452 32,807 23,298 37,455 896,685 As at 31 December 2016 3,387 269,878 2,817 9,366 16,103 41,279 342,830

As at 1 January 2016 4,638 793,035 5,452 32,807 23,298 37,455 896,685 *) Asset Retirement Obligation (ARO) described in Note 14 Additions - - - - 636 69,933 70,569 Disposals - (105,192) (973) (3,787) - - (109,952) As at 31 December 2016, none of the properties 202 thousand) relating mainly to old fully deprecia- Transfer 266 61,349 775 3 719 - (66,109) - were pledged to secure bank loans. ted Mobile RAN equipment. As at 31 December 2016 4,904 749,192 5,254 32,739 23,934 41,279 857,302

Accumulated depreciation In 2016, transfers from assets under construction Property and equipment, excluding motor vehicles,

As at 1 January 2015 917 514,321 4,582 18,777 5,497 - 544,094 to property, plant, and equipment mainly com- is insured to a limit of EUR 754,826 thousand (2015: Charge for the year 294 60,484 972 4,958 1,185 - 67,893 prised investments to upgrade of the existing EUR 745,147 thousand). Each motor vehicle is in- Disposals - (49,885) (3,075) (1,043) - - (54,003) network, particularly Mobile RAN (Radio Access sured to a limit of EUR 5,000 thousand (2015: EUR As at 31 December 2015 1,211 524,920 2,479 22,692 6,682 - 557,984 Network) LTE + 2G/3G equipment & releases and 5,000 thousand) for damage on health and ex-

As at 1 January 2016 1,211 524,920 2,479 22,692 6,682 - 557,984 Mobile RAN Infrastructure and increase in IP rou- penses related to death and EUR 2,000 thousand Charge for the year 306 59,394 921 4,468 1,149 - 66,238 ters equipment & releases. (2015: EUR 2,000 thousand) for damage caused by Disposals - (105,000) (963) (3,787) - - (109,750) destroyed, seized or lost items. As at 31 December 2016 1,517 479,314 2,437 23,373 7,831 - 514,472 During 2016, the Company had a disposal in gross *) Asset Retirement Obligation (ARO) described in Note 14 value of EUR 109,952 thousand (book value of EUR

88 89 2016 Annual Report Chapter 8

5. Intangible Assets

Other Other Telecom. Under Telecom. Under In thousands of EUR Software Intangible Total In thousands of EUR Software Intangible Total Licences Construction Licences Construction Assets Assets

Cost Carrying amount As at 1 January 2015 153,999 185,277 16,524 6,779 362,579 As at 1 January 2015 50,126 124,929 13,468 6,779 195,302 Additions - - - 15,253 15,253 Disposals (36,125) (727) (266) - (37,118) As at 31 December 2015 45,582 114,277 12,289 7,845 179,993 Transfer 13,518 - 669 (14,187) - As at 1 January 2016 45,582 114,277 12,289 7,845 179,993 As at 31 December 2015 131,392 184,550 16,927 7,845 340,714 As at 31 December 2016 40,171 104,355 10,797 6,920 162,243 As at 1 January 2016 131,392 184,550 16,927 7,845 340,714 Additions - - - 13,649 13,649 In 2016, the addition mainly comprises the During 2016, the Company had a disposal in Disposals (1,821) - - - (1,821) Transfer 13,825 - 749 (14,574) - purchase of an IT applications and software pac- gross value of EUR 1,821 thousand (book va- kages. lue of EUR 14 thousand) relating mainly to old As at 31 December 2016 143,396 184,550 17,676 6,920 352,542 mostly fully depreciated messaging service Accumulated amortisation platforms. As at 1 January 2015 103,873 60,348 3,056 - 167,277 Charge for the year 18,789 9,925 1,848 - 30,562 Disposals (36,852) - (266) - (37,118)

As at 31 December 2015 85,810 70,273 4,638 - 160,721

As at 1 January 2016 85,810 70,273 4,638 - 160,721 Charge for the year 19,221 9,922 2,241 - 31,384 Disposals (1,806) - - - (1,806)

As at 31 December 2016 103,225 80,195 6,879 - 190,299

90 91 2016 Annual Report Chapter 8

6. Investments in Subsidiaries Deferred tax assets and deferred tax liabilities are attributable to the items detailed in the table below: Investments in subsidiaries at a cost of EUR 100 cial Register on 1 February 2005. The table below thousand represent an investment in the wholly- summarises the subsidiary’s fi nancial informa- 31 December 2016 31 December 2015 In thousands of EUR -owned subsidiary Orange CorpSec, spol. s r.o. tion: Assets Liabilities Net Assets Liabilities Net The subsidiary was registered in the Commer- Property, plant, and equipment - 23,338 (23,338) - 19,648 (19,648) Inventories 420 - 420 377 - 377 Profi t/loss Receivables 1,681 - 1,681 1,672 - 1,672 In thousands of EUR Assets Liabilities Equity Revenues for the Period Accruals 5,721 - 5,721 4,351 - 4,351 Provisions 9,827 - 9,827 8,890 - 8,890 As at 31 December 2016 697 175 522 1,080 73 As at 31 December 2015 664 215 449 1,080 262 Net deferred tax 17,649 23,338 (5,689) 15,290 19,648 (4,358)

In 2010, the Company recognised an in- EUR 6 thousand, which is considered im- Deferred tax assets and liabilities were offset dustries of 4.36 % of operating profi t (2015: 4.36 vestment in Nadácia Orange (hereinafter also material for the purpose of these fi nancial on the grounds that the Company has the le- %). Effective from 1 January 2017 the statutory referred to as the “Foundation”) at a cost of statements. gally-enforceable right to offset their current tax tax rate changed to 21 % and for special levy to assets against current tax liabilities and the de- 8.72 %. The special levy would gradually redu- ferred taxes relate to the same taxation authority. ce to 4.36 % by 2021. The rate effective from 1 7. Deferred Tax Assets and Liabilities January 2017 were used in the deferred tax cal- The statutory tax rate for 2016 was 22 % (2015: culation. Movement in the deferred tax account is as follows: 22 %) plus the special levy for the regulated in-

In thousands of EUR 31 December 2016 31 December 2015

At beginning of period – net deferred tax liability 4,358 7,978 Income statement 929 (3,620) Change in tax rate via income statement 402 -

At end of period – net deferred tax liability 5,689 4,358

92 93 2016 Annual Report Chapter 8

8. Inventories Statistical method for the retail market is Individual method based on an examination In thousands of EUR 31 December 2016 31 December 2015 based on historical losses and leads to a of specifi c overdue items for the wholesale

Raw materials and consumables 743 1,027 separate impairment rate for each ageing market (roaming, interconnect). Merchandise 16,362 20,896 balance category. Provision for slow moving merchandise (1,414) (1,430)

15,691 20,493 Ageing of past due but not impaired trade and other receivables Previously-recognised provisions for slow-mo- pledged to secure bank loans. In thousands of EUR 31 December 2016 31 December 2015 ving merchandise were released for assets that Changes in provisions for slow moving mer- were sold or donated. chandise are recognised under Note 18 line” Total receivable 65,715 57,944 Of which: non due 51,759 49,378 As at 31 December 2016, no inventories were Purchased goods and services”. past due impaired 6,878 6,486 past due not impaired 7,078 2,080 Less than 180 days 7,078 2,080 9. Trade and Other Receivables, Net Between 180 days and 360 days - - More than 360 days - -

In thousands of EUR 31 December 2016 31 December 2015

Accounts receivable 93,965 94,676 Movements in the allowance for doubtful debts Allowance for doubtful debts and receivables (28,250) (36,732) In thousands of EUR 31 December 2016 31 December 2015 65,715 57,944 Balance at beginning of the year 36,732 39,042 Net charge against bad debt provision (8,482) (2,310) As at 31 December 2016, no trade receivables Allowances for doubtful debts are currently de- were pledged to secure bank loans. The trade termined according to two methods: Balance at the end of the year 28,250 36,732 receivables are decreased by the allowance for receivables expected to be irrecoverable.

94 95 2016 Annual Report Chapter 8

Aging of impaired trade and other receivables 11. Cash and Cash Equivalents

In thousands of EUR 31 December 2016 31 December 2015 In thousands of EUR 31 December 2016 31 December 2015

Total impaired 28,250 36,732 Cash on hand and cash equivalents 107 108 Bank balances and deposits 5,983 5,401 Of which: Less than 180 days 1,401 1,261 Cash and cash equivalents in the balance sheet 6,090 5,509 Between 180 days and 360 days 1,840 1,858 More than 360 days 25,010 33,614 The Company’s cash balance includes cur- current account held by Orange SA, except for rent bank accounts and overnight balances with reasonable level held for operational reasons. banks. The Company transfers free cash to its 10. Current Financial Assets/Liabilities 12. Equity 15,260 thousand) relate to the Legal Reserve The balance of EUR 21,834 thousand (2015: Cash balances are not subject to any foreign ex- Fund, which is not available for distribution and EUR 36,582 thousand liability) represents the change risk as they are denominated in the local Share capital should be used to cover future losses arising receivable on the cash-pooling account of the currency. Maximum borrowing headroom is EUR As at 31 December 2016, the authorised share from business activities, if any. Company with Orange SA, held in BNP Paribas 66 million. The balances bear an interest rate cal- capital comprised 1,181,755 ordinary shares France. On 15 March 2006, the Company signed culated as EONIA (EONIA: Euro Overnight Index (2015: 1,181,755), with a nominal value of EUR Dividends a Centralised Treasury Management Agreement Average). Interest is accounted for on a monthly 33.19 each, 1 ordinary share (2015: 1) with a no- As at the preparation date of these fi nancial with France Telecom S.A (the successor com- basis and capitalised on the Company’s current minal value of EUR 13.78, and 1 ordinary share statements the Board of Directors made no de- pany Orange SA) with the aim of centralisation account. In the event of an overdraft, the interest (2015: 1) with a nominal value of EUR 0.66. Hol- cision regarding the amount of dividends to be and optimisation of affi liated companies’ cash is paid on a monthly basis and is calculated as ders of these shares are entitled to dividends paid from the 2016 profi t. surplus under the best technical and fi nancial EONIA plus the fi xed rate of interest. The interest as declared from time to time and are entitled In June 2016, the shareholders approved a di- conditions and ensuring a fi ne-tuning of the rate was negative rate 0.329% as at 31 Decem- to one vote per share at the general meetings vidend payment of EUR 115 million related to liquidity at the Group level. ber 2016 (0.773 % as at 31 December 2015). of the Company. undistributed profi ts from previous years at their annual general meeting. An amount of EUR 100 Reserves million was paid in June 2016 and EUR 15 million Reserves of EUR 15,260 thousand (2015: EUR was paid in December 2016.

96 97 2016 Annual Report Chapter 8

13. Loans and Borrowings Company paid an arrangement fees in June 2015 of EUR 8 thousand, an average site usage Non-current Payables in amount of EUR 714 thousand (0.34 % from the of 15 years, discount rate of 1.015 %, dismantling Non-current payables represent long-term lia- On 30 June 2015 the Company signed a Credit Total Maximum amount of the Facility). Interest cost index of 3.00 % and number of sites of bility resulted from the capitalised unavoidable Facility Agreement with Atlas Services Belgium is paid on a quarterly basis and is calculated as 2,398 (2015: EUR 25,747 thousand, 15 years, future spectrum fees payable to Telecommunica- S.A.. The credit facility was drawn down in two EURIBOR plus 0.89 % margin. The interest rate 1.18 %, 3.00 %, and of 2,374 sites, respectively). tion Offi ce. The liabilities were initially discounted tranches: Tranche A in the amount of EUR 110,000 was 0.571 % as at 31 December 2016 (0.759 % as The Company records the carrying amount to the fair value at discount rate that ranges thousand was drawn down as at 30 June 2015 and at 31 December 2015). of EUR 16,102 thousand (2015: EUR 16,616 from 1.99 % to 2.25 %. The liability is amor- Tranche B in the amount of EUR 100,000 thousand The loan is unsecured and the Company may thousand) in the asset sideof the balance sheet tised using the effective interest rate method. was drawn down as at 20 June 2016. use the funds for the general corporate operation (Note 4). The fi nal maturity date for Tranche A is 30 June purposes. Fair value of the liability using the discount rate 2019 and for Tranche B is 30 June 2020. The Other provisions represent a provision for retire- of 1.018 % is by EUR 2 million higher compared ment benefi t costs and provision for litigations. to its carrying amount at the balance sheet date. 14. Provisions and Non-current Payables Provisions

Provision for Base In thousands of EUR Other Total Station Dismantling 15. Trade Payables and Other Liabilities Balance at 31 December 2015 25,747 3,878 29,625 Provisions made during the year 897 225 1,122 In thousands of EUR 31 December 2016 31 December 2015 Provisions used during the year - - - Trade payables 47,612 54,394 Provisions reversed during the year - (2,120) (2,120) Accrued liabilities 18,862 31,290 Balance at 31 December 2016 26,644 1,983 28,627 Tax liabilities (VAT) 5,741 3,346 Liabilities to employees 10,949 11,359 In thousands of EUR 31 December 2016 31 December 2015 Other current liabilities 557 611

Non-current 28,626 29,624 Total 83,721 101,000 Current 11

28,627 29,625 Accounts payables are classifi ed as current bearing and the prevailing credit period on liabilities if the payment is due within one purchases is from one to two months. A provision for asset retirement obligation was using the following assumptions based on an year or less. Trade payables are non-interest recorded in the amount of EUR 26,644 thousand, expert’s study: average costs of site demolition

98 99 2016 Annual Report Chapter 8

Payables within and after maturity 16. Deferred Income 31 December 2016 In thousands of EUR 31 December 2016 31 December 2015 within maturity within 360 days more than 360 In thousands of EUR Total Prepaid phone cards (Prima cards) 6,233 6,948 period overdue days overdue Post paid customers 14,442 12,990 Trade payables 44,453 3,071 88 47,612 Other 209 274 Accrued liabilities 18,862 - -18,862 Total 20,884 20,212 Tax liabilities (VAT) 5,741 - -5,741 Liabilities to employees 10,949 - -10,949 Other current liabilities 557 - -557 17. Revenues Total 80,562 3,071 88 83,721 Revenues are presented in the table below: The payables in category “within 360 days overdue” were paid during January 2017. In thousands of EUR 2016 2015

31 December 2015 Mobile voice services 262,059 280,110 Mobile non-voice services 165,360 164,312 within maturity within 360 days more than 360 In thousands of EUR Total Sale of equipment 55,344 50,316 period overdue days overdue Other revenues 69,135 65,885

Trade payables 50,566 3,828 - 54,394 Total Revenues 551,898 560,623 Accrued liabilities 31,290 --31,290 Tax liabilities (VAT) 3,346 --3,346 Liabilities to employees 11,359 --11,359 Other current liabilities 611 --611 18. External Purchases External purchases are presented in the table below: Total 97,172 3,828 - 101,000

In thousands of EUR 2016 2015 Liabilities to employees include social fund liabilities: Cost of equipment sold 101,969 100,768 In thousands of EUR 2016 2015 Purchased goods and services 75,486 75,568 Service fees and interoperator costs 84,693 81,649 As at 1 January 143 137 Costs associated with non-current assets 12,894 12,767 Additions 355 324 Other 18,422 18,640 Utilisation 329 318 Total external purchases 293,464 289,392 As at 31 December 169 143

100 101 2016 Annual Report Chapter 8

19. Other Operating Expenses/(Income), Net 21. Income Tax Other operating expenses are presented in the table below: Reconciliation of the effective tax rate is shown in the table below:

In thousands of EUR 2016 2015 In thousands of EUR 2016 2015

Brand royalty and management fees 13,446 13,759 Income tax payable Bad debt provision 400 270 from operating activities 27,942 34,736 FX differences net 11 154 Deferred income tax Other operating expenses 2,317 2,403 from operating activities 929 (3,620) change in tax rate 402 - Total other operating expenses 16,174 16,586 Total income tax 29,273 31,116 Other operating income is presented in the table below: The Slovak Corporate Tax is 22 % effective from 1 January, 2014. Effective from 1 January 2017 In thousands of EUR 2016 2015 tax rate changed to 21 %. Property fees 1,076 1,065 Late payment interest on trade receivables 1,324 2,574 In thousands of EUR 2016 % 2015 % Gain on disposal of property, plant and equipment 8,305 775 Other operating income 4,221 3,548 Profi t before tax 110,973 119,365 Income tax at the rate of 22% 24,414 22.0 % 26,260 22.0 % Total other operating income 14,926 7,962 Income tax in respect of prior year 119 0.1 % 1,275 1.1 % Special levy 4.36% for regulated businesses 4,547 4.1 % 4,883 4.1 % 20. Wages and Contributions Impact of adjusting items: permanent differences and other differences 193 0.2 % (1,302) -1.1 %

In thousands of EUR 2016 2015 Total income tax 29,273 26.4 % 31,116 26.1 % Wages and salaries 26,168 25,482 Bonuses and untaken holiday payroll provision 6,207 6,445 Social contribution 12,103 11,507 Other 1,876 2,345

Total wages and contributions 46,354 45,779

102 103 2016 Annual Report Chapter 8

22. Financial Instruments The capital structure of the Company consists of lated as total loans (as shown in the separate In measuring the capital structure management cash and cash equivalents, cash pooling (Note balance sheet) less cash and cash equivalents. disregards the loans provided by the sharehol- Risk Management Policies 11), long term debt/loan (Note 13) and equi- ders or parent company, as these are considered The Company’s activities expose it to a variety ty attributable to equity holders of the parent, Increase in Net debt to equity ratio mainly relates all to be available capital funds allocated to the of fi nancial risks, including mainly credit risk. The comprising issued capital, reserves and retained to drawing of a new Long term loan (see Note 13). Company. Company’s overall risk management programme earnings as disclosed in Note 12. focuses on the unpredictability of fi nancial mar- kets and the economic environment and seeks to The Company reviews the capital structure re- Main Categories of Financial Instruments minimise potential adverse effects on its fi nancial gularly. Based on the review and the General In thousands of EUR Note 31 December 2016 31 December 2015 performance. Meeting’s approval, the Company balances its overall capital structure through the payment of Financial assets

Capital Risk Management dividends, the issue of new debt, or the redem- Cash and cash equivalents 11 6,090 5,509 The Company manages its capital to ensure that ption of existing debt. Trade and other receivables 9 65,715 57,944 Current fi nancial assets 10 21,834 - it will be able to continue as a going concern whi- le maximising the return to shareholders and The Company monitors capital on the basis of Financial liabilities benefi ts to other stakeholders through the opti- the gearing ratio. This ratio is calculated as net Current fi nancial liabilities 10 - 36,582 misation of the debt and equity balance. debt divided by total capital. Net debt is calcu- Long term loan 13 210,000 110,000 Trade payables and other liabilities 15 83,721 101,000

The gearing ratios as at 31 December 2016 and 2015 were as follows: Financial Risk Management Foreign Exchange Risk The Company’s activities expose it to fi nancial The Company’s exposure is to changes in USD, In thousands of EUR 31 December 2016 31 December 2015 risks in foreign currency exchange rates and in- which represents a minor risk in respect of the Cash and cash equivalents (6,090) (5,509) terest rates. The Company does not use any US dollar’s position to the total amount of liabili- Long term loan 210,000 110,000 Financial (assets)/liabilities (21,834) 36,582 offi cial statistical methods for measuring market ties/assets, and therefore no sensitivity analysis risk exposures; however, management’s asses- was performed. Net debt 182,076 141,073 sments of the Company’s exposure to those Equity 265,078 298,296 risks are described below: Net debt to equity 69 % 47 %

104 105 2016 Annual Report Chapter 8

The carrying amounts of the Company’s foreign currency denominated assets and liabilities at the terest bearing borrowings is estimated as the be able to meet its fi nancial obligations as they reporting date are as follows: present value of the future cash fl ows disco- fall due. The Company’s approach to managing unted at market rate of interest at the reporting liquidity is to ensure that it will always have suf- Liabilities Assets In thousands of EUR date. fi cient liquidity to meet its liabilities when due, 2016 2015 2016 2015 under both normal and stressed conditions, Currency USD 3,012 1,224 684 378 Credit Risk without incurring unacceptable losses or risking Interest Rate Risk a decrease or an increase of profi tability by EUR Financial instruments that could potential- damage to the Company’s reputation. Mana- The Group’s Treasury department exercises the 1,882 thousand (2015: EUR 1,465 thousand). ly expose the Company to concentration of gement monitors risks with rolling 12 - month policy of cash pooling of the Company’s avai- counterparty risk consist primarily of trade re- forecasts of the Company’s liquidity reserve lable funds to maximise economic returns and The sensitivities were estimated based on year ceivables and cash and cash equivalents. (comprising loan facility and cash and cash equ- to manage the cash optimisation and centra- end balances and the actual results might differ ivalents) on the basis of expected cash fl ows. lisation under the best fi nancial conditions for from these estimates. The Company considers that it has limited con- most of the affi liated companies (see Note 10). centration in credit risk with respect to trade The Group’s Treasury department exercises the Such instruments are not exposed to the risk of Fair Values Versus Carrying Amounts accounts receivables due to its large and diver- policy of cash pooling the Company’s available interest rate fl uctuation. Owing to the character The fair value of trade and other receivables, se customer base (residential, professional and funds to maximise economic returns and to ma- of the fi nancial liabilities/assets, the Compa- cash and cash equivalents, fi nance lease re- large business customers) operating in nume- nage the cash optimisation and centralisation ny does not assume any risk relating to interest ceivables, trade and other payables, except rous industries and located in many regions. In under the best fi nancial conditions for most of rate movements. Management has entered in to for long term payables (refer to Note 14) loans addition, the maximum value of the counterpar- the affi liated companies (see Note 10). loan contracts which are exposed to fl oating in- and interest bearing borrowings with variable ty risk on these fi nancial assets is equal to their terest rates in the normal course of business. interest rate is approximated by their carrying recognized net book value. An analysis of net The following tables detail the Company’s rema- Management policy is to enter in the variable amounts as at 31 December 2016 as well as at trade receivables past due is provided in Note 9. ining contractual maturity for its non-derivative interest rates borrowings contracts only. Ma- 31 December 2015. In addition, should a customer fail to pay any due fi nancial liabilities without provisions in which nagement does not see the need to hedge the payment for services, the Company will limit the the maturity is unknown. The tables have been interest rates related to these contracts. Basis for Determining Fair Values customer’s outgoing calls and, thereafter, the drawn up based on the undiscounted cash The fair value of trade and other receivables, provision of services will be disconnected. fl ows of fi nancial liabilities based on the earliest An increase or decrease of interest rate (EURI- cash and cash equivalents, fi nance lease recei- date on which the Company can be required to BOR, LIBOR) by 100 basis points, considering vables, trade and other payables, including long Liquidity Risk pay. The table includes the principal and inte- all other factors remain unchanged, would cause term payables (refer to Note 14) loans and in- Liquidity risk is the risk that the Company will not rest cash fl ows if applicable.

106 107 2016 Annual Report Chapter 8

2016 2015

Year end Year end Less Less effective 1 - 3 3 months 1-5 5+ effective 1 - 3 3 months 1-5 5+ In thousands of EUR Note than 1 Total In thousands of EUR Note than 1 Total interest months to 1 year years y e a r s interest months to 1 year years y e a r s month month rate rate

Non-current payables 14 - 134 402 1,073 8,723 6,718 17,050 Non-current payables 14 - 131 392 1,044 8,493 8,557 18,617 Non-interest bearing Non-interest bearing 15 - 37,685 46,036 - - 83,721 15 - 28,044 72,940 16 - - 101,000 liabilities liabilities Financial guarantee Financial guarantee ------contracts contracts Long term loan 13 - - - 210,000 - 210,000 Long term loan 13 - - - 110,000 - 110,000 Interest and commitment Interest and commitment 13 0.571 % - 300 899 2,427 - 3,626 fee from Long term loan fee from Long term loan 0.759 % - 297 732 2,087 3,116 Variable interest rate Variable interest rate 10 ------100.773 %36,582----36,582 instruments instruments

Total 37,819 46,738 1,972 221,150 6,718 314,397 Total 64,757 73,629 1,792 120,580 8,557 269,315

108 109 2016 Annual Report Chapter 8

The following tables detail the Company’s on of information on non-derivative fi nancial 23. Related Party Transactions expected maturity for its non-derivative fi nan- assets is necessary in order to understand the cial assets. The tables have been drawn up Company’s liquidity risk management as the The immediate parent company and the ultima- ly. Transactions with related parties have been based on the undiscounted contractual matu- liquidity is managed on a net asset and liability te controlling party of the Company are Atlas conducted under standard business conditions. rities of the fi nancial assets including interest basis. Services Belgium, S.A., (from August 2008, up Receivables, liabilities, purchases and sales with that will be earned on those assets. The inclusi- to July: Wirefree Services Nederland B.V.) and related parties are summarised in the following Orange SA (incorporated in France), respective- tables: 2016 In thousands of EUR 31 December 2016 31 December 2015 Year end Less 1 - 3 3 months 1-5 5+ In thousands of EUR effective than 1 months to 1 year years years Liabilities - current and unbilled supplies interest rate month Atlas Service Belgium (parent company) 210,003 110,007 Non-current receivables - - - - 8,869 - Orange SA (ultimate control.party) 1,913 1,706 Non-interest bearing receivables - 47,261 5,931 12,523 - - Orange SA - cash pool account - 36,582 Cash and cash equivalents 0.02 % 6,090 - - - - Orange Brand Services (fellow subsidiary) 1,943 2,044 Variable interest rate instruments -0.329 %21,834---- Mobistar (fellow subsidiary) 1,420 983 Total 75,185 5,931 12,523 8,869 - Orange CorpSec (subsidiary) 198 90 Orange Polska (fellow subsidiary) 611 119 Other 826 297 2015 216,914 151,828 Year end Less 1 - 3 3 months 1-5 5+ In thousands of EUR effective than 1 months to 1 year years y e a r s Trade accounts receivable - current 31 December 2016 31 December 2015 interest rate month Orange SA (ultimate control.party) 1,360 1,437 Non-current receivables - - - - 6,889 - Orange SA - cash pool account 21,834 - Non-interest bearing receivabless - 44,808 4,095 9,041 - - Atlas Service Belgium (parent company) 500 643 Cash and cash equivalents 0.30 % 5,509 - - - - Orange Moldova (fellow subsidiary) 122 125 Variable interest rate instruments ------Orange Polska (fellow subsidiary) 203 119 Equant (fellow subsidiary) 97 2,334 Total 50,317 4,095 9,041 6,889 - Orange Romania (fellow subsidiary) 85 79 Other 196 44

24,397 4,781

110 111 2016 Annual Report Chapter 8

In thousands of EUR 2016 2015 24. Information on Income and Emoluments of Members of the Statutory Bodies, Supervisory Bodies, and Other Bodies Purchases of the Accounting Entity Orange SA (ultimate control.party) 9,931 11,844 Atlas Service Belgium (mother company) 1,353 759 Orange Polska (fellow subsidiary) 1,381 198 The income and emoluments of the Company’s members of the statutory body, supervisory body Orange Brand Services (fellow subsidiary) 7,878 8,120 and other bodies are summarised in the following table: Orange CorpSec (subsidiary) 1,076 1,078 Mobinil (fellow subsidiary) 971 - In thousands of EUR 2016 2015 Orange Romania (fellow subsidiary) 633 448 Orange Belgium (ex Mobistar) (fellow subsidiary) 219 673 Board of directors 32 48 Other 62 424 Supervisory body - 42 Executive Management Board 2,496 2,751 23,504 23,544 Total 2,528 2,841 Sales

Orange SA (ultimate control.party) 2,772 3,322 Equant (fellow subsidiary) 2,307 2,388 25. Operating Leasing Orange Polska (fellow subsidiary) 1,197 407 Orange Brand Services (fellow subsidiary) 500 - Leases as the Lessee gical premises, and land and rooftops for base Orange Romania (fellow subsidiary) 465 386 Orange Moldova (fellow subsidiary) 233 295 The Company is committed under operating le- stations. The future aggregate minimum lease Other 228 293 ases to terms ranging from 1 to 7 years, which payments under non-cancellable operating lea-

7,702 7,091 relate primarily to offi ce, retail space, technolo- ses are as follows:

In thousands of EUR 31 December 2016 31 December 2015

The following related party transactions are Intra-group international telecom services – Less than one year 2,874 2,791 Between one and fi ve years 6,478 8,670 applicable for the Company: mobile and other telecom services with other After fi ve years 488 542 group companies; and Total 9,840 12,003 Management fees, brand fees – transactions mainly with Orange Brand Services and Oran- Shared products – mobile and other telecom Total expenses for rent represent EUR 11 mil- land and rooftops for base stations and other ge SA (ultimate parent company); services with other group companies. lion (2015: EUR 11 million) and primarily represent equipment. The Company maintains evidence of offi ce, retail space, technological premises and assets under lease contracts.

112 113 2016 Annual Report Chapter 8

26. Commitments and Contingencies

Litigation relate to investments in other long-life assets. The other factors that are believed to be reasonable the related actual results. The estimates and as- The Company is not involved in any legal proce- Company also has OPEX commitments in the to- under the circumstances, the results of which sumptions that have a signifi cant risk of causing edings outside of the normal course of business tal amount of EUR 27,850 thousand (2015: EUR form the basis of making judgments about the a material adjustment to the carrying amounts of except for litigations for which provision was cre- 31,257 thousand) mainly related to the purcha- carrying values of assets and liabilities that are assets and liabilities within the next fi nancial year ated (see Notes 14, 27). Management does not se of handsets in amount of EUR 8,626 thousand not readily apparent from other sources. Actual are discussed below: believe that the resolution of the Company’s legal (2015: EUR 8.628 thousand) and network mainte- results may differ from these estimates. proceedings will have a material adverse effect nance in amount of EUR 8,820 thousand (2015: Estimated Useful Lives of Property, on its fi nancial position, the result of the opera- 12,160 thousand). The estimates and underlying assumptions are Plant, and Equipment tions, or cash fl ows. reviewed on an ongoing basis. Revisions to ac- Useful lives, which are described in Note 3 (g) Legal Commitments counting estimates are recognised in the period and (h), are determined based on the Compa- Commitments The Company has not given any guarantees to in which the estimate is revised, if the revision ny’s best estimate of the useful lives of long- The Company has CAPEX commitments in a to- third parties in 2016 (2015: EUR 0). affects only that period, or in the period of the -term assets and are reviewed annually. tal amount of EUR 22,191 thousand (2015: EUR revision and future periods if the revision affects 18,773 thousand), of which EUR 12,738 thousand Contingent Assets both current and future periods. A change in estimated useful lives of assets (2015: EUR 10.209 thousand) relate to investment The Company considers contract penalties as by 10 % against the actual depreciation as in 2G/3G network and EUR 2,971 thousand (2015: contingent assets as the probability of their col- The Company makes estimates and assumptions at 31 December 2016 would have increased / EUR 2,973 thousand) relate to investments in 4G lections is very low (below 50 %). concerning the future. The resulting accoun- (decreased) the property plant and equipment network assets, and the remaining commitments ting estimates will, by defi nition, seldom equal amounts as shown below:

27. Critical Accounting Estimates, Judgements, 31 December 2016 31 December 2015 In thousands of EUR and Key Sources of Estimate Uncertainty Increase Decrease Increase Decrease

Estimated useful life in years +/-10 % 6,022 (7,360) 6,172 (7,544) The preparation of the fi nancial statements in application of policies and the reported amounts conformity with IFRS as adopted by the EU of assets and liabilities, income and expenses. requires management to make judgments, The estimates and the associated assumptions The sensitivities were estimated based on year end balances and the actual results might differ from estimates and assumptions that affect the are based on historical experience and various these estimates.

114 115 2016 Annual Report Chapter 8

Estimated Asset Retirement Obligation settlement. It is discounted at a risk-free rate. This 28. Subsequent Events The Company is obligated to dismantle techni- estimate is revised annually and the provision is cal equipment and restore technical sites when consequently adjusted against the relevant asset No other events with a material impact on the true and fair presentation of facts as presented in these terminates its operation. The provision is based where appropriate. financial statements occurred after 31 December 2016 up to the preparation date of these financial on dismantling costs (on a per-site basis) incur- statements. red by the Company to meet its environmental Sensitivity of ARO reserves commitments over the asset dismantling and site A change in discount rate by 1 bps and chan- 29. Authorisation of Financial Statements restorations planning. The provision is assessed ge in dismantling costs by 10 % against initial on the basis of the identifi ed costs for the cur- assumption as at 31 December 2016 would The financial statements were authorised for issue by management on 12 April 2017. rent fi nancial year, extrapolated for future years have increased / (decreased) the Estimated by using the best estimate for the commitment ARO by the amounts shown below:

31 December 2016 31 December 2015 In thousands of EUR Increase Decrease Increase Decrease

Discount rate +/- 1bps 3,660 (4,288) (3,530) 4,135 Dismantling costs +/- 10 % 2,664 (2,664) 2,574 (2,574) Pavol Lančarič Antoine Guillaume Guilbaud The sensitivities were estimated based on year end balances and the actual results might differ from Chief Executive Offi cer Chief Financial Offi cer and Deputy CEO these estimates.

116 117

Orange Slovensko, a.s. Metodova 8 821 08 Bratislava Slovak Republic

www.orange.sk