company information

Transcription

company information

COMPANY
INFORMATION
50_YEARS
Company Details
Company Name
Empresa Nacional de Telecomunicaciones S.A. (Entel Chile S.A.)
Domicile
Santiago de Chile
Tax ID
92.580.000-7
Type of Entity
Corporation, registered with the Chilean Superintendency of
Securities and Insurance (No. 0162) and governed by Act No.
18,046 and its regulations
Contact Information
Address
Casilla 4254, Santiago de Chile
Telephone
+56 2 2360 0123
Fax
+56 2 2360 3424
Head Office
Avenida Costanera Sur Río Mapocho No 2760, piso 22, Torre C, Las Condes, Santiago
Finance and Management Control
Investor Relations
Carmen Luz de la Cerda Castro, cdelacerda@entel.cl
Filing Office
Website
www.entel.cl
Contents
Annual Report 2014 - For Translation Purposes Only
2
Company Details
Chairman’s Letter
Connecting Chileans for 50 Years
Highlights 50 Years
Highlights 2014
1 .
2 .
3 .
4 .
5 .
6 .
01
04
13
18
20
Corporate Information
Profile
Corporate Governance
Board of Directors
Management
Human Resources
Corporate Image
23
24
30
35
36
38
44
Strategy
49
Infrastructure
Customer Experience
Innovation
50
54
59
Our Business
63
Industry
Regulatory Framework
Market Segments
Consumer Segment
Enterprise Segment
Corporate Segment
Wholesale Segment
65
70
74
76
82
86
90
Sustainability
95
Sustainability
96
Results
101
Consolidated Results
102
Subsidiaries107
Entel Perú
Americatel Perú
Entel Call Center
108
112
116
Note:
Financial information is provided
in a separate volume
3
Chairman’s Letter
Dear shareholders,
In December 2014, Entel celebrated its 50th anniversary.
Over these five decades, our company has seen the rise and
fall of technologies, regulations and markets.
There are many highlights in Entel’s history, such as the first
satellite station in Latin America located in Longovilo (Chile)
in 1968, the Multicarrier service connecting Chile and other
countries in the 1990s, the first GSM mobile network, and
the calling-party-pays system at the end of the 1990s and
the start of the new millennium.
More recently, we have seen the introduction of fiber optics, mobile Internet, and 3G and 4G, which, together with
smartphones and number portability, have marked the
company’s recent history.
These have been 50 years of continuous adaptation and reinvention in a market whose permanent dynamism never
fails to surprise. The year 2014 was one of contrasts: while
the company has faced new challenges, many of these have
made it possible to lay the foundations for Entel’s future development.
It is in this context that, on behalf of the Board of Directors,
I have the pleasure to present our results for the latest financial year.
Successful launch of Entel Perú
Following the acquisition and takeover of Nextel Perú in August 2013, the year 2014 was marked by efforts to prepare
the company for this new phase in its development.
This preparation has involved building up a more in-depth
understanding of the Peruvian market and forming teams
to meet the challenges that lie ahead. The company has also
6
rolled out 3G and latest generation 4G networks throughout
Peru using the AWS spectrum acquired in 2013, doubling
the number of sites and making Entel’s 4G network the largest in the country in terms of coverage and quality. Finally,
the company has established a network of distribution and
top-up channels, and expanded the range of services and
handsets it provides.
Having completed these preparatory phases, the Entel brand
was ready to launch in 2014. The final step was the successful replacement of the old Nextel brand with Entel Perú.
In the fourth quarter of 2014, Entel Perú captured 39% of net
growth among postpaid customers and 33% among prepaid
customers. Its customer base saw a net increase of 258,000
customers in just three months, with a high percentage of
high-value customers switching to Entel. Overall, the company captured 52% of all customers switching companies
in the market.
By the end of 2014, Entel Perú had a customer base of
1,738,450 users, 53% of which were postpaid customers
(with contracts).
Over these months, the reasons behind the company’s expansion have been proven: it has been possible to roll out
the required network, towers and infrastructure; regulation has encouraged investment and competition; there is
spectrum availability; it has been possible to increase the
number of sales channels; the market is in the middle of a
transformation toward data, creating space for innovative
and disruptive products; and, finally, there is an opportunity
for a new brand distinguished by the service it provides.
We are enthusiastic about our achievements so far but we
know this is a long-term project. It is possible to achieve the
vision of being a significant operator that is able to provide
value to the country and our shareholders, but there remains much work ahead.
The acquisition costs must be balanced by customer growth,
Entel must continue rolling out its network and platforms to
provide the quality to which it has committed, and it must
continue to make a transparent contribution to Peruvian society, together with our partners in the country.
Customer Base in Chile
At the end of 2014, Entel’s mobile customer base in Chile
had reached 10,102,116 users, down 3% compared to 2013.
However the company’s mobile market share remained relatively stable, closing the year at around 38%.
This change in the number of customers is largely explained
by the loss of prepaid customers (voice and mobile broadband), an industry-wide trend whose effects have not only
been felt by Entel and which saw an overall fall of 1%. This
phenomenon is primarily due to less promotions being offered as a result of a 75% reduction in mobile access charges,
as well as a slowdown in the Chilean economy.
However, the company’s business model, which is based on
providing a high-quality service and the best network and
infrastructure, backed by its high level of innovation, has
allowed it to capture a larger number of postpaid customers
(with contracts), especially high-value customers.
As such, the postpaid customer base (voice and mobile broadband), which now represents 35% of the company’s customer base, grew by 4% over the year.
From Voice to Data
As of December 2014, 66% of postpaid customers had a
data plan or pack (Internet), a significant and sustained increase from 55% in 2013, 42% in 2012 and 28% in 2011.
This increase in penetration and usage means the annual
total volume of data carried over the network for prepaid
and postpaid customers with smartphones increased by
45% in 2014.
To ensure its business model is aligned with this trend,
Entel began the process of transforming its tariff structure
in 2013, introducing a system based on a fixed price, with
additional charges for any data consumed by customers in
excess of their allowance. Not only does this reflect the reality in Chile, but it is also in line with international trends.
In 2014, the company developed this structure further, complementing it with plans offering unlimited minutes in certain segments, a move unthinkable just a few years ago. As
a result, consolidated revenue is less sensitive to reductions
in the use of traditional voice, helping protect average revenue per user (ARPU) and providing room for growth from
increasing data consumption.
4G Services and Spectrum in Chile
Following publication of the respective legislation, Entel
launched a 4G LTE network on the 2,600 MHz band in March
2014. By December 2014, the network had more than 800
points of presence throughout the country.
7
CONSOLIDATED REVENUE
CLP million
CONSOLIDATED REVENUE BY SERVICE TYPE (%)
CONSOLIDATED REVENUE (ADJUSTED)
CLP million
1%
3%
ENTEL HOGAR
AND OTHER RESIDENTIAL**
16%
AMERICATEL PERÚ
2%
CALL CENTER AND
OTHER REVENUE
1,668,052
1,643,930
1,700,000
1,440,978
FIXED ENTERPRISE
AND CORPORATE*
1,585,730
1,516,822
1,275,000
1%
850,000
9%
-4%
69%
MOBILE PERÚ
MOBILE CHILE
425,000
0
2012
2013
2014
2013*
2014*
* Comparable accounting base and excluding Entel Perú.
* Integrated services (voice, data and Internet) for the Enterprise and Corporate
segments, and network leasing and traffic business.
** Entel Hogar and long distance.
This marked the first step in developing out a true 4G network, which will come with the rollout of 700 MHz spectrum,
a development that is expected to take place soon, following
the ruling by the Court of Appeal rejecting challenges to the
award of the tender, which has been holding back implementation.
representing a substantial increase in a market in which
growth has been largely flat.
This combination of spectra will allow Entel to provide highspeed data services, improving coverage and quality, particularly indoors.
Residential
While waiting for the publication of the legislation, in 2014,
Entel conducted successful testing of 4G LTE on the 700 MHz
band, the first company to do so in Chile and Latin America.
Business Services
The Enterprise segment saw growth in sales and revenue
from large-scale fixed products using fiber-optic cables.
This has been driven by Entel’s investment in fiber-optic
networks with GPON technology over the last two years, focusing on commercial districts and buildings.
In terms of mobile services, the penetration of data plans
and packs in the Corporate and SME segments stood at 56%
as of December 2014.
The company’s wireless Entel Hogar services were launched in 2012 to serve areas with limited fixed coverage and
have helped secure growth in the fixed telephone market,
while the rest of the industry has remained stagnant or contracted.
In 2014, Entel launched its new Autopack self-installation
fixed telephone kit, available through mass-market distribution channels and department stores.
This helped increase the total number of contracted services for Entel Hogar to 275,987 by the end of 2014.
Investment
Growth in the use of our data centers and cloud platforms
has continued in the Corporate Segment, in addition to traditional data network connectivity projects.
In the Enterprise and Corporate segments, revenue from
data, IT and fixed Internet services grew by 14% in 2014,
8
Entel invested a total of USD 893 million in 2014. Of this figure, USD 287 million was destined for Entel Perú, primarily
to upgrade and expand the 2G, 3G and 4G voice and data
network.
EBITDA
CLP million
600,000
536,525
EBITDA (ADJUSTED)
CLP million
200,000
479,669
469,330
467,316
450,000
167,294
146,965
370,150
150,000
-21%
2%
300,000
100,000
-62%
56,471
150,000
0
PROFIT FOR FINANCIAL YEAR
CLP million
50,000
2012
2013
2014
2013*
2014*
0
2012
2013
2014
* Comparable accounting base and excluding Entel Perú.
In Chile, the company directly invested USD 370 in its mobile
business, mainly to increase the capacity of its 3G network,
maintain service quality and implement its 4G network. This
figure included USD 48 million of investment to meet mandatory coverage requirements for rural areas as part of the
public tender for 2,600 MHz spectrum.
The company also invested USD 120 million in data and fixed access network infrastructure, the expansion of shared
platforms and data centers. Finally, as part of normal activity in the Corporate and SME segments, USD 93 million was
invested in projects and services for customers.
Finance
Two series of bonds were successfully issued in July 2014.
The first was issued on the local market, with a total value
of UF 7 million* and a term of 21 years, achieving a final rate
of UF+3.53%, which comfortably surpassed expectations.
The second series was issued on the international market
for USD 800 million with a term of 12 years, and was also
highly successful, attracting demand of over USD 2 billion.
These resources were used for the early repayment of debt
and financing the company’s investment plan and leave
Entel in a solid financial position in terms of cash flow and
the maturity of its business activities in Chile and Peru.
The results obtained from these operations reflect the investor confidence in Entel, a product of its consistent business strategy, solid brand, proven track record and significant cash generating capacity.
Financial Results
The results for 2014 partly reflect industry adjustment
associated with the reduction in mobile termination rates
and the slowdown of the Chilean economy, affecting the
company's trend of double-digit growth.
Consolidated revenue for the year was CLP 1,668,052 million, an increase of 1%, including CLP 151,729 million from
mobile operations in Peru.
It should be noted that net revenue for the Entel Group (excluding Entel Perú) was CLP 1,516,822, down 4% with respect to 2013. Excluding revenue from access charges for
both years and using a comparable basis for accounting for
postpaid handsets, underlying growth was 2%.
* UF: Unidad de Fomento, an inflation-linked unit of account used in Chile.
9
In line with the expected effects of activities to position the
Entel brand in Peru, which involve significant investments
and commercial costs, EBITDA fell from CLP 467,316 million in 2013 to CLP 370,150 million in 2014. However, excluding the impact of the accounting differences for postpaid
handsets and the effects of the Peruvian subsidiary for both
years reveals underlying growth of 2%.
While modest, this achievement comes in a year marked by
reductions in mobile access charges and a significant economic slowdown, making us confident our business in Chile
remains robust.
In light of the above, the company’s profits for the year were
CLP 56,471 million, down 62% with respect to the previous
year. In addition to the aforementioned impact of the reduction in EBITDA, profits were also affected by increased net
financial expenditure derived from higher debt and higher
inflation in Chile, which has affected instruments denominated in UF.
Sustainability
A continued commitment to the development of telecommunications in Chile, helping to reduce the digital divide, has
been part of Entel’s mission and vision since its formation
in the aftermath of the earthquake that struck Chile in 1960.
This vision is perfectly captured by the Conectando Chile
project, which began in 2014 and in which Entel will provide
telephone and Internet services to 730 isolated and rural
areas nationwide.
The initiative will be implemented in two phases, which will
benefit 181 and 549 communities, and forms part of the in-
10
vestment requirements undertaken as part of the rollout of
the company’s 2,600 MHz and 700 MHz networks.
Projects of this nature are complemented by others, such as
Entel Barrio Feliz, which aims to recover public spaces and
improve quality of life. The initiative, which is partly financed by Entel customers recycling old handsets and opting
to receive their bill online, has helped the company recover around 6,600 m² of public spaces, creating new green
areas and modern infrastructure as part of projects benefiting over 1,600 families in seven districts throughout the
country.
Awards
As part of Entel’s commitment to excellence and quality,
in 2014, the company received a number of major awards
for corporate governance, sustainability and service quality. These include Best Place to Innovate 2014 for the communications industry, awarded by the Faculty of Economics
and Business at the University of Chile, and the Fundación
Recyclápolis and El Mercurio award for the successful Entel
Barrio Feliz initiative.
The company is also extremely proud to receive the Best
Customer Experience Award for the telecommunications
industry in Ibero-America for the third year, an initiative of
the Ibero-American Association of Business Customer Relations (AIAREC), and for being ranked first in the mobile
category of the ProCalidad National Customer Satisfaction
Awards for the 12th year in a row.
Dear shareholders, it has been 50 years since Entel was
created. Over the years, the company has shown its ability
to adapt to change, continuously reformulating its business
model.
As I mentioned above, the management review of 2014 reveals a complex and demanding year for both the sector
and the company, a year of intense activity in which I believe
Entel has made significant progress in laying the foundations for its current and future development.
All that remains is to express my gratitude for the professional and human dedication and effort of all our staff, the receptiveness and understanding of all those affected by the
company’s activities on a day-to-day basis, the support and
collaboration of our suppliers, the preference—and occasionally tolerance—of our customers and, of course, the trust
placed in the company by you, our shareholders.
With my best wishes,
Juan Hurtado Vicuña
Chairman
11
A giant in numbers
» 127 meters high
» 4 years to build
» 8,000 cubic meters of concrete
» 1,100 tons of steel
» withstands up to 8
on the Mercalli scale
12
Connecting Chileans for 50 years
> Origins
The earthquake of 1960, one of the worst disasters in the history of Chile and the world’s
strongest ever recorded earthquake at the time
underlined the need for a modern and secure telecommunications system.
After a few intermediate steps, Empresa Nacional de Telecomunicaciones (Entel) was established in 1964, starting out as a public body whose
main responsibilities included ensuring the continuity of interurban communications and providing international long-distance connectivity.
Since then, the story of Entel has been intimately connected to the development of Chile, made
possible by the company’s people and its capacity for innovation. Entel’s mission of providing
connectivity to everyone throughout the country
has seen it undertake numerous major works,
including rolling out what was, at the time, a modern microwave network throughout the majority
of the national territory, launching the first Latin
American satellite station in Longovilo in 1968,
and embarking on its most iconic project to date
at the start of the 1970s to address the need for
a central node in its telecommunications system:
the Entel Tower.
Santiago Astrain Castro, an electric civil
engineer from the University of Chile, was
Entel’s first CEO and held the post from 1965
to 1970.
> A national icon and a fundamental part
of the image of Chile’s capital city, Santiago
Construction on the mega-project began in 1970.
At a height of 127 meters, it was one of the bi-
ggest engineering feats of the era. Ahead of its
time, the structure was designed to withstand
seismic forces of up to eight on the Mercalli scale,
with special stiffness properties making the oscillations resulting from a large-scale earthquake
practically imperceptible.
Strategically located on the corner of Alameda
and Amunátegui, supported on more than 8,000
m³ of concrete and over 1,100 tons of steel, the
structure towers over Santiago. In August 1974,
the final section of the tower was completed, making it the tallest building in Chile, a record it held
for over two decades.
At this stage, the share of the telecommunications industry in the consumer price index was
less than 2%, although this was soon to change.
One of the main changes in the industry occurred
as a result of legislation designed to deregulate
pricing and remove barriers to entry to the market. This was complemented by a framework establishing objective economic criteria and regulated processes for fixing prices when required,
as well as the requirement to provide interconnection between operators of fixed, mobile and
other services, and maximum interconnection
prices based on cost criteria.
The expansion of the satellite network began in 1977, making it possible to provide
coverage throughout all of mainland Chile
by 1985. The project began under the management of Jaime Machuca B., CEO between
1977 and 1982.
Even if the structure does not currently perform
the same role as before, the facilities beneath
and around it are still a major node in the Entel
network, housing equipment for the trunk network and public telephone services, alongside
Internet, television and radio.
Two managers were responsible for the
project: construction began under Salomón
Suwalsky (1970–73) and was completed
under the management of Rodrigo José
Alonso (1974–77).
> The voice business
Local voice telephone services comprised around
60% of total industry revenue, followed by longdistance (between 25 and 35%), with the remainder comprising private voice and data services,
primarily for businesses, which required a range
of fixed and satellite data solutions.
> Privatization and ownership
Following the changes above, in 1986, the Chilean
government began the privatization of the company, which was completed in 1992. This was one
of the most important events in the industry, radically altering its structure. A year later, through
a series of stock market transactions, Chilquinta
(now Almendral) acquired a 19.9% share in the
company and in June 1996, a meeting of Entel
shareholders authorized an increase in capital,
allowing the entry of Stet International Netherlands N.V. (later taken over by Telecom Italia),
which shared control with Chilquinta through a
shareholder agreement. In March 2001, Telecom
Italia acquired the shares of Chilquinta and the
13
Matte Group, increasing its stake in the company
to 54.76%.
The Italian group held its share until March 2005,
when they were bought by the current owner Almendral S.A.
The process to privatize Entel began when
Gerson Echavarría was CEO of the company
(1982–86) and was completed under the leadership of Iván van de Wyngard (1986–94).
> New industry and reinvention
In parallel to this expansion, after making inroads
into fixed residential Internet, first with switched
Internet services and then with broadband alternatives, Entel began to focus on the business
services segment. The company was able to capitalize on the explosive advance in enterprise
connectivity requirements, positioning itself as a
leader across all segments in this area, building
a reputation for network and connectivity services, as well as services related to the outsourcing of integrated IT solutions that combine voice,
data and Internet.
> Innovation and infrastructure
Technological development, regulatory changes
and the explosive globalization of the 1990s resulted in more change to the telecommunications
market. The Multicarrier system was established
in 1994, allowing customers to easily choose
between operators for national and international
long-distance calls.
In the context of these changes and true to the
vision on which it was founded, Entel designed
a strategy that has allowed it to consolidate its
leadership of the fast-moving and dynamic telecommunications industry, continuously reformulating its business model to succeed in highly
competitive markets. Its strategy is based on
three principles: high-quality service, infrastructure and the ability to innovate and adapt.
It was also during the 1990s that the company
successfully entered the mobile, market while holding its strong position in the competitive
long-distance market with its carrier code 123.
In the second half of the decade, Entel was one
of the operators authorized to acquire spectrum,
and the rollout of networks, coupled with the
regulatory changes that established the Calling
Party Pays system, saw the company join the re-
volution that ushered in the mobile world, quickly
taking the lead of the rapidly expanding industry
at the start of the new millennium.
14
The company has been able to adapt and update its business model to face the challenges of
a continuously changing industry. This vision has
helped Entel develop a spirit of change and innovation, evidenced by some of the major achievements in its history, not just in Chile, but for the
continent as a whole. In 1998, Entel launched the
first GSM (Global System for Mobile Communications) network in Latin America. This followed on
from the success of the first commercial network
with ATM technology in the region in 1997, which
subsequently evolved into the current multiservice IP network for fixed broadband solutions,
and was followed by the first mobile broadband
service delivered over the GPRS platform on the
1,900 MHz band in 2001.
Entel was also the first Chilean company to offer
a service providing email access from mobile
handsets in 2005, an innovation that was reflected regionally when it became the first operator in Latin America to launch commercial 3.5G
(2006) and HSDPA+ (2009) networks.
The company’s commitment to provide cuttingedge services saw it introduce HSPA+ Dual Ca-
rrier technology in 2011, making it one of the first
companies in the world to offer this standard.
Its inherent capacity for innovation gives Entel
the opportunity to sustain its leadership in the
integration of IT services over high-capacity business networks with Chile’s first Tier III certified
data center. To strengthen and expand this type
of innovation, Entel has formed strategic partnerships with leading technology companies such
as Vodafone, Samsung and Ericsson in order to
continue providing first-class services.
Richard Büchi Buc was responsible for leading the process to reinvent Entel in the
1990s. When he took over as CEO in 1994,
the company only provided long-distance
services and only operated in Chile. He expanded the company into Central America,
the United States, Venezuelan and Peru, and
on his departure in 2011, Entel led the mobile industry and was also present in data,
voice and IT. His tenure also saw the creation of businesses such as the Call Center.
Chaca School, Arica.
A student who benefited from the
Todo Chile Comunicado project,
which connected over 3 million
people throughout the country.
15
Aerial photography from the
book ‘Santiago Desde el Aire’
by Chilean photographer
Guy Wenborne.
16
> A distinctive experience
> Regional expansion
To promote closer relationships with its customers in an industry experiencing vertiginous
growth, in the second half of 2011, Entel integrated its mobile and fixed operations under a new
organizational structure based on the market
segments in which it operates: Consumer, Enterprise, Corporate and Wholesale.
Entel has had a presence in Peru since 2002,
firstly through Americatel and then with Servicios Call Center.
In January 2012, a new challenge arose as a result of regulatory changes introducing number
portability for mobile telephone services throughout the country and the unlocking of handsets.
In this new context of increased competition, the
company continued expanding its services with
Entel Hogar, which saw it begin to provide wireless fixed telephone, satellite television and mobile Internet services to residential customers.
During this period, the company also launched a
new service in the Wholesale Segment with an
agreement to provide the department store Falabella with network infrastructure services to
allow it to provide services as a Virtual Mobile
Network Operator (MVNO).
Finally, March 2013 saw the publication of the decree formally awarding block B of frequency on
the 2,600 MHz band to Will S.A., one of the Entel
Group’s concessionaires, allowing the company
to consolidate its technological leadership by
rolling out Chile’s largest LTE (4G) network, with
800 points of presence throughout the country.
Antonio Büchi Buc has led the company
since 2011 and has been at the head of its
transformation from voice services to mobile data.
For five decades, Entel has diversified, providing
world-class services that allow Chileans to live
better connected everyday, a project which has
now crossed borders.
In 2013, the company significantly expanded its
Peruvian operations with the acquisition of 100%
of Nextel Perú, the country’s third largest mobile company, after signing a purchase agreement
with NII Holdings in April in a share transaction
valued at USD 410.6 million.
2014 marked the successful launch of the
new Entel Perú brand, focusing on the Consumer Segment.
The award of a block of 40 MHz on the AWS band
in 2013 represented a step forward in Entel’s
strategy to position itself on a larger scale in the
neighboring country, allowing it to roll out 4G LTE
networks in Peru.
In Peru, the company has focused on building
its technical capacity by upgrading the totality
of its network, now the most modern in the country and offering the best 4G LTE experience.
This has been complemented by the expansion
of telecommunications infrastructure to improve
the quality and coverage of mobile services on
a daily basis. The company’s goal is to provide
a reliable data service, full 4G LTE coverage and
a voice service that provides customers with flat
rates to all destinations.
The process was completed in October 2014
after nine months of work, culminating in the
switch from the Nextel Perú brand to Entel Perú.
Continuing its regional expansion, the company
is now well placed to replicate the strategy that
has been so successful in Chile over the last 50
years in Peru.
17
Highlights 50 Years
1960
1970
1980
1990
1964
1974
1987
1990
1995
CREATION
ENTEL TOWER
NETWORK DIGITIZATION
FIBER OPTIC NETWORK
INTERNET SERVICES
Empresa Nacional de Telecomunicaciones (Entel) was established
by Treasury Decree on December
30 to provide national and international long-distance telephone and
telegraph services to businesses.
The company opened the 127 m
structure that houses the National
Telecommunications Center.
Entel reaffirmed its technological
leadership with the digitization of
its national and international longdistance network.
Entel began the development of
its fiber-optic network, which now
runs for over 5,000 km throughout
the length of Chile.
Entel began providing Internet access services.
1968
FIRST SATELLITE STATION
Entel installed Latin America’s first
satellite station in Longovilo.
1996
1977
SATELLITE EXPANSION
Construction of three new satellite stations to provide coverage
throughout mainland Chile, completed in 1985.
1992
LOCAL TELEPHONE SERVICE
PRIVATIZATION
The company began operations
through the subsidiary Entel Telefonía Local.
Completion of the privatization process that began in 1986.
1993
EASTER ISLAND
INTERNATIONAL EXPANSION
Entel installed infrastructure to
provide telephone services on Easter Island, making it the only operator with this type of presence on
the island.
Entel began its expansion abroad
with the creation of Americatel
Corp to provide long-distance services in the United States. It took
over Americatel Centroamérica
the following year. Both companies
were sold in 2006.
1994
MULTICARRIER SYSTEM
Under Multicarrier code 123, Entel
began to compete with other operators in its original business area.
18
ANALOG CELLPHONE
SERVICE
Entel took over Telecom Celular
S.A., an analog mobile services
provider with coverage in various
regions throughout the country.
1997
PCS MOBILE SERVICE
Following the award of two PCS
(Personal Communication Service)
licenses, Entel launched a national
mobile service. In 1998, Entel began to offer digital mobile services
on 60 MHz of spectrum on the 1,900
MHz band.
2000
2010
2000
IT SERVICES
2010
2012
2013
CALL CENTER
Entel expanded the areas in which
it operates to include IT services.
NEW DATA CENTER
TODO CHILE COMUNICADO
CIUDAD DE LOS VALLES PHASE 2
Entel launched the first phase of
2,000 m² of its Ciudad de los Valles
data center with plans for a total of
8,000 m² of floor space, marking
the beginning of an industry-wide
shift toward high-quality, local data
centers.
Entel and the Chilean Government
successfully completed the first
large connectivity project, providing
broadband coverage to a total of
1,474 rural areas, benefiting more
than 3 million people.
Launch of phase two of the Ciudad
de los Valles data center in March,
increasing floor space at the site
to 4,000 m² (in addition to 3,000
m² at other sites). The project has
Tier III Design Documents and Tier
III Constructed Facility certification,
awarded by the Uptime Institute.
To improve customer service and
promote the use of remote channels, the company created the Entel
Call Center subsidiary, which subsequently expanded its services to
other customers in Chile and Peru.
LAUNCH OF BLACKBERRY
Entel became the first company in
Chile to offer BlackBerry technology.
ACQUISITION OF TRANSAM AND
WILL
2001
2006
MOBILE BROADBAND
3.5G LAUNCH
Entel PCS launched Latin America’s
first Mobile Broadband service with
the implementation of the first
1,900 MHz GPRS platform to provide Internet access from mobile
handsets.
Entel became the first Latin American operator to launch a commercial 3.5G mobile network.
EXPANSION IN PERU
PARTNERSHIP WITH VODAFONE
2011
Entel created Americatel Perú to
provide long-distance and traffic
termination services in the country.
Entel formed a strategic partnership with Vodafone, the world’s leading mobile operator.
DUAL CARRIER PIONEER
ENTEL WILL
TAKEOVER OF CIENTEC
EntelPhone acquired two licenses
on the 3,500 MHz band for wireless fixed telephone services, also
allowing it to provide broadband
Internet access (Entel Will).
Acquisition of Cientec Computación
S.A to consolidate Entel’s strategy
in the IT market.
2005
CONNECTING ANTARCTICA
Installation of infrastructure to
provide telephone connectivity in
Antarctica.
Entel acquired 100% of shares in
Transam, an intermediary telecommunications services company and
long-distance operator, and Will, a
local wireless telephone and data
transmission services company.
2008
Entel became the first operator in
Latin America to implement HSPA+
Dual Carrier, a technological milestone in the evolution of its 3G
HSDPA+ network, providing users
with maximum download speeds
of up to 22 Mbps, almost double the
existing capacity.
2009
ENTEL VISA
CARD ISSUED
FIRST COMMERCIAL
HSPA+ NETWORK
Launch of the Entel Visa card, the
fruit of a long-term partnership
with Banco de Chile
Operating the first commercial
HSPA+ network in Latin America,
Entel PCS was able to offer the
fastest broadband speeds on the
market.
AWARD OF 4G
SPECTRUM
Entel was awarded the central 40
MHz block on the 2,600 MHz band
in a tender run by the Department
of Telecommunications, allowing it
to provide services over networks
using LTE or 4G technology.
EXPANSION OF PAY TV
The company launched Entel Hogar, providing wireless fixed telephone services, satellite television
and Internet to the residential
segment. The services aim to meet
the connectivity and entertainment
needs of customers in areas with
limited coverage.
ACQUISITION OF NEXTEL PERÚ
Entel acquired a 100% share in
Nextel Perú, the third largest mobile company in the country.
4G SPECTRUM IN PERU
Through its Americatel Perú subsidiary, Entel acquired a 40 MHz
block on the Advanced Wireless
Service (AWS) band, allowing it to
deploy networks with LTE technology.
MVNO SERVICES
Entel signed an agreement with
the department store Falabella
to provide network infrastructure
services for the company’s Mobile
Virtual Network Operator (MVNO)
subsidiary, a new segment of the
Chilean market.
RESTRUCTURING
Corporate restructuring to integrate the fixed and mobile businesses
to promote closer customer relationships and allow the company
to adapt to new challenges and
the transformation of the market.
Under its new structure, activities
are organized based on market
segments.
19
Highlights 2014
Successful bond
issue on the local
market
Mobile Termination Rate
At the start of the year, the authorities applied a 75% reduction in
mobile termination rates as part of
the process to set the rate for the
mobile industry, which takes place
every five years.
First Latin American
member of the PMI
Global Executive
Council
Entel became the first company in
the region on the PMI Global Executive Council, an international organization comprising representatives
from leading global companies
including NASA, Boeing, Airbus, Microsoft and Dell.
January
Data center operational
efficiency award
With demand among investors almost double the offer, Entel successfully issued bullet bonds on the
local market with a value of UF 7
million and a term of 21 years. The
totality of resources raised by this
transaction will be used to refinance
existing liabilities.
Entel received a Brill Award, one of
the most highly regarded awards
for efficient operations, from the
Uptime Institute, internationally
known for the creation and management of the Tier III standard, to
which data centers throughout the
world aspire.
BEST CUSTOMER
EXPERIENCE 2014
Bond issue on the
international market
After complying with a strict review
process, Entel was certified as an
Excellent SAP Hosting Partner, making it the only company in Chile
with this rating.
The Ibero-American Association of
Business Customer Relations (AIAREC) awarded Entel Best Customer
Experience 2014 in Ibero-America
for the telecommunications category. The company was also awarded Best Customer Experience in
Chile for the telecommunications
category. The award is based on the
opinion of 130,000 consumers in
Brazil, Chile, Colombia, Spain, Mexico and Venezuela.
Entel successfully issued USD 800
million in 11.5-year bonds in New
York, the second transaction of its
type undertaken by the company
outside Chile. The resources raised
will be used for the company’s investment plan and other corporate
purposes.
March
May
July
SAP Hosting Partner
Excellent Certification
Leading portability in
Peru
NATIONAL CUSTOMER
SATISFACTION
AWARD
For the twelth year in a row, Entel
was awarded first prize in the mobile category of the National Customer
Satisfaction Prize run by ProCalidad,
reaffirming its leadership in terms
of service quality.
Conectando Chile
Launch of the Conectando Chile project, which will provide voice and Internet coverage to 730 isolated and
rural areas throughout the country.
The initiative will be implemented
in two phases, the first of which will
benefit 181 communities, with the
second adding the remaining 549.
The project forms part of the investment requirements undertaken as
part of the rollout of the company’s
2,600 MHz and 700 MHz networks.
Best entrepreneur and
company award 2014
Entel came first in the Best Business
Initiative category in the award run
by ‘Diario Financiero’ for the launch
of its 4G service and providing
access to all customers with full
multimedia plans and 4G handsets
without additional charges.
CORPORATE
GOVERNANCE LEADER
SAP HANA Operation
Services certification
Entel became the first telecommunications company in Chile to receive the SAP HANA Operation Services certification, ensuring it meets
all the requirements of SAP AG for
the deployment of hosting and platform administration services for
Corporate customers.
Elimination of LDN
Following a gradual rollout since
March, the process to eliminate the
national long-distance category in
each of the country’s 13 zones was
completed in August 2014.
August
The company successfully launched
the Entel Perú brand, supported by
the expansion and modernization of
the existing 2G, 3G and 4G network,
with an attractive range of products
focusing on high-value customers.
October
Leading innovation
Entel came first in the Most Innovative Companies ranking for 2014, run
by the ESE Business School at the
Los Andes University.
Best place to innovate
In recognition of its policies and
initiatives for innovation, Entel was
awarded the Best Place to Innovate
prize for 2014 for the telecommunications industry by the Faculty of
Economics and Business at the University of Chile in partnership with
the Chilean Economic Development
Agency (CORFO) and the research
firm Cadem.
ALAS20 ranked Entel third in the
Corporate Governance Leading Business category as part of the Govern Art project that took place in
Chile, Colombia and Peru to promote
and recognize companies, investors
and professionals that contribute to
the sustainable development of Latin America toward 2020.
Launch of the Entel
brand in Peru
More than 87,000 customers switched to Entel Perú since the maximum period to complete the change
process was reduced to 24 hours in
July 2014. This has allowed Entel
to lead the market in terms of the
number of customers switching to
the company (both prepaid and postpaid), almost double the next best
competitor.
Recyclápolis–El
Mercurio prize for
Barrio Feliz
Fundación Recyclápolis and El Mercurio awarded Entel second place
in the Earth category for its Barrio
Feliz project, which aims to improve
quality of life by recovering public
spaces. Entel customers help finance the initiative by recycling old
handsets and signing up to receive
their bill electronically.
November
Successful 4G LTE
pilot on 700 MHz
In partnership with Ericsson, Entel
carried out its first tests of the 4G
LTE network on the 700 MHz band
in Rancagua, a first in Latin America. With 10 test sites, transmission
took place on the APT700 network
(Asia-Pacific Telecommunity 700
MHz), successfully providing indoor
and outdoor coverage.
December
The Parque Titanium
development
by night, the location of Entel’s
head office.
22
50 _
YEARS
Entel is born to connect Chile
Entel was founded in response to the devastating
effects of the earthquake that struck Valdivia in
1960, severely disrupting the country’s interurban
network, to ensure the security of Chile’s communications network, with a commitment to making
people better connected via a modern and secure
telecommunications system.
1964
23
01
Company Information
Profile
The best and most modern infrastructure in
the industry allows Entel to provide first-class
telecommunications services that help more people live better connected every day.
Ownership
Competitive Position
Market capitalization USD 2,377 million
Industry revenue share 29.7%
Entel Mobile Chile
»» Revenue share of services 44.7%
»» Market share 38%
»» Top of mind 46%
»» Brand preference 46%
Leadership among high-value customers
»» Average revenue per user +27%
»» Satisfaction gap +32pp
Fixed
»» Revenue share Enterprise Segment 20%
»» Revenue share Corporate Segment 63%
»» Satisfaction gap Corporate Segment 5pp
36.12%
OTHER
54.76%
ALTEL
INVERSIONES
LTDA (1)
9.12%
PENSION
FUNDS
Mobile customers
CAPEX 2014
11.8 million
USD 893 million
10,106
1,043
11,985
11,840
1,556
1,738
996
861
8.1%
2,628
CAPEX / Total revenue: 30.8%
Entel Perú
2,840
2,962
PERU
MBB
6,435
6,593
6,279
PP
2013
2014
Sustained
4G obligations (non-commercial)
1.7 pp
Entel Hogar
0.5 pp
Extraordinary CAPEX
12.2 pp
Ordinary CAPEX
18.6 pp
growth in
SS
2012
10.0 pp
4.3%
high-value
customers.
Source: Capex and Revenue IDG Dec 2014 in CLP.
24
Spectrum
Chile: 150 MHz. Peru: 156.5 MHz
Chile(1)
Perú(2)
2012
2014
2012
2014
80 MHz
150 MHz
81.5 MHz
156.5 MHz
Infrastructure
Chile: 5,597 PoPs. Peru: 1,713 PoPs.
+20%
5,597
4,676
Indoor coverage rolled
out Jan-Sep 2014
+113%
1,713
(3)
805
2014
2012
CHILE
Chile(4): 1,817,000 m2
Data center (m²):
Chile: 7,500 Perú: 600
2014
2012
PERÚ
Conversion to data
Postpaid customers with data 66%
Data plans (% of postpaid customer base).
66%
55%
Source: internal data.
(1): Spectrum in Chile only includes mobile.
42%
(2): Spectrum in Peru only includes Americatel 2012,
28%
Americatel + Entel Perú 2014.
(3): Point of Presence (PoPs) for
Americatel + Nextel Peru in 2012.
(4): 300,000 m2 were added in
2011
2012
2013
2014
25
Santiago for 2013.
Entel is one of the leading telecommunications companies
in Chile and aims to provide services with a distinctive quality, backed by the most modern infrastructure in the industry. The company provides a full range of services, including
mobile and fixed communications, IT outsourcing and contact center, offering consumers, enterprises and corporations a world-class connectivity experience.
This strategy, consolidated by 50 years of experience, has
allowed the company to position itself as solid and reliable, with the financial infrastructure to continue developing
its leadership in Chile and take advantage of development
opportunities that are currently present in the telecommunications market in Peru, where it has positioned itself as a
full-service operator.
In Peru, the company operates through the subsidiaries
Entel Perú, Americatel Perú and Servicios de Call Center del
Perú. With a similar strategy in terms of positioning and the
expansion of services, backed by the most modern infrastructure in the country, in 2014, the company successfully
launched the Entel Perú brand, supported by the expansion
and modernization of the existing 2G, 3G and 4G network,
and offering an attractive range of products focusing on
high-value customers.
Market Share
As of December 2014, Entel led Chile’s mobile services market, with 10,102,116 customers, representing 38% of the
total number of users, taking into account both voice and
mobile broadband.
This figure is complemented by 1,738,450 customers in
Peru, a net increase of 11% from the previous period, giving
Entel a market share of approximately 6%.
Ownership
With a market capitalization of USD 2,377 million at the end
of 2014, Entel Chile S.A. is one of the largest corporations
in Chile, with ownership distributed among 2,086 shareholders. The controlling shareholder is Inversiones ALTEL
Ltda., with a share of 54.76%. Inversiones ALTEL Ltda. is a
subsidiary of Almendral S.A., an investment company controlled by six corporate groups with a presence in various
26
sectors of the Chilean economy and a strong commitment to
the development of the telecommunications and IT industry.
Investment
Entel continuously invests in its networks, platforms and
data centers in Chile and Peru. In 2014, it invested a total
of USD 893 million, which included a project for mandatory
areas and the provision of minimum coverage as part of the
acquisition of spectrum on the 2,600 MHz band in Chile.
Credit Ratings
To maintain the solvency of the business, Entel has a credit
rating policy of maintaining investment grade status and its
debt structure is managed accordingly.
Credit Ratings
Ratings Agency
Rating
Outlook
Classification
Date
Standard & Poor’s
BBB
Stable
July 2014
Fitch International
BBB+
Stable
July 2014
Fitch Local
AA-
Stable
April 2014
ICR Local
AA
Negative
November 2014
GROSS REVENUE BY SEGMENT
2%
9%
3%
AMERICATEL CALL CENTER
PERU
ENTEL PERU
5%
WHOLESALE
ENTEL CHILE
12%
CORPORATIONS
ENTEL CHILE
17%
ENTERPRISES
ENTEL CHILE
52%
CONSUMERS
ENTEL
CHILE
KEY FIGURES (CLP million)
2014
2013
% Change
2012
1,668,052
1,643,930
1%
1,440,978
EBITDA
370,150
467,316
-21%
536,525
Operating profit
126,769
218,037
-42%
221,580
Annual profit
56,471
146,965
-62%
167,294
Profit per share (CLP)
238.75
621.36
-62%
707.3
Dividend yield (%)
3.77
5.26
-
5.61
Return on equity (%)
6.15
17.34
-
21.08
Assets
3,035,795
2,256,950
35%
1,695,255
Liabilities
2,079,451
1,375,865
51%
881,249
956,345
881,085
9%
814,007
Consolidated revenue
Equity
27
Strategy
Vision
Mission
Entel’s mission is to ensure
we all live better connected,
making a responsible contribution to the transformation
of our society.
A world-class service company that provides its customers with a unique experience. A
place for people to reach their
full potential. A company continuously reinventing itself to
strengthen its leadership.
Entel’s mission and vision are backed by a solid brand, a challenging
workplace, the country’s most modern and reliable networks
and data centers, best practices in customer service, and a
systematic culture of innovation across all areas of the business.
BUSINESS FOCUS AND EMPOWERING PRINCIPLES
Integrated
Mobile data growth,
transforming
service range
Home wireless
Fiber optic
solutions
for SMEs
solutions IT
services for
Corporations and
Growth
in Peru
SMEs
Business priorities
Invest in
Customer-focused
Innovation in
People that fit in
Contributing to
spectrum and
improvements
products and
with
development and
infrastructure
and efficiency
services
our culture
sustainability
Empowering principles
28
Strategic Priorities
1.
2.
3.
4.
5.
6.
7.
8.
Maintain the standards of service of our network and IT infrastructure
Ensure end-to-end quality through efficient networks and technology platforms that meet
the highest standards, designed to guarantee the highest standards when it comes to experience and allow the company to provide its customers with the best possible service.
Continuously improve the customer experience and loyalty
Entel systematically works to ensure its customers have the best possible experience when
they interact with the company, from consumers to large corporations, for mobile, fixed and
IT services. This ensures customers have easy, secure and reliable access to connectivity
and related services, helping increase loyalty.
Promote innovation
Entel’s objective is to provide customers with the most attractive and innovative range of
mobile and fixed services. The company does not only have people and resources for making
the latest technologies available but also to ensure the organization transforms in a coherent
manner and delivers a distinctive experience.
Expand mobile data services
Entel continues adapting in order to lead the transformation in mobile data, exploring the
specific needs and opportunities of our customers, redesigning our products and facilitating
interaction through stores, digital platforms and other service channels.
Promote the growth of outsourcing services
Entel works to maintain its leadership in the business market, supporting customers in the
various sectors with integrated high-quality products.
The company’s aim is to increase its share of IT outsourcing in the Enterprise and Corporate
segments, focusing on integrated services that combine connectivity, cloud platforms and IT
outsourcing.
Expand residential services
Entel aims to take advantage of the reputation of its brand to expand its range of voice, Internet and television products in specific sectors of the residential market.
Expand our operations in Peru
Entel aims for Entel Perú to stand out in all dimensions of service. The company continues
to use its experience and capacity to take advantage of opportunities for development and
growth in this high-potential market.
Efficiency in investments and costs
Entel firmly believes the quality and excellence it seeks to provide its customers requires
efficiency in its operations and the deployment of resources. The company measures itself
against the highest standards in the markets in which it operates.
29
01
Company Information
Corporate Governance
Entel’s corporate governance system aims to create sustainable
value for shareholders and
society by making a significant contribution to the development of telecommunications
and information technology.
Entel Mountain Bike Challenge 2014 –
connected to sport.
Over 3,500 cyclists attended the
largest mountain biking event in Chile.
Principles and Corporate
Governance Manual
Entel’s corporate governance aims to safeguard the rights of
shareholders and is based on ensuring the equal treatment
of all shareholders, the timely and accurate disclosure of
any relevant information about the company, and the responsibility of the Board of Directors in making decisions and
approving strategic directives. A fundamental part of corporate governance to ensure the creation of long-term value
30
is the supervision of senior management in line with these
principles and the development of strong and sustainable
relationships with the company’s stakeholders (shareholders, employees, customers, suppliers and the community).
To ensure sound and efficient management, Entel has a
Corporate Governance Manual, which was last updated in
March 2014. The manual governs aspects related to legisla-
tion covering the securities market and corporations that is
designed to improve corporate governance, as well as specific regulations covering corporations and the adoption of
standards and guidelines established by General Regulation
No. 341 of the Chilean Superintendency of Securities and Insurance that help improve the governance of the company.
The committee’s main duties include examining the external auditors’ reports, balance sheets and other financial
statements, proposing auditors and risk ratings agencies to
the board of directors and reviewing transactions between
related parties, in addition to other material contained in the
Corporate Governance Manual.
The Corporate Governance Manual brings together all the
relevant guidelines in a single volume, in addition to updated
versions of the previous regulations governing the Directors
Committee and the handling of market sensitive information, without affecting the company’s by-laws and code of
ethics.
The Entel Directors Committee has three members: Luis Felipe Gazitúa Achondo (Chairman of the Committee), Richard
Büchi Buc (Director of the Controller) and Alejandro Pérez
Rodríguez (Independent Director).
Organization and Operation
Directors Committee
Corporate governance at Entel is the responsibility of a
board of directors with nine members who do not hold executive positions at the company and are appointed for twoyear terms with the possibility of re-election. The current
board of directors was appointed at the Annual General
Meeting of Shareholders held in April 2014.
Ethics
To ensure sound management and meet the highest standards in good practices, Entel has an Ethics Committee
comprising six company executives appointed by the CEO.
This committee is responsible for resolving various regulatory issues, especially responding to claims made via
whistle-blower channels.
The members of the committee are: Manuel Araya, Juan
Baraqui, Luis Cerón, Cristián Maturana, Alfredo Parot and
Felipe Straub. The secretary is Diego Santa María.
The functions of the board include representing shareholders and managing the company to ensure it meets its financial, social and environmental objectives. The board also
appoints the CEO, who has all the legal powers and responsibilities of their position. By law, the position of CEO is
incompatible with the roles of company chairman, director,
auditor and accountant.
The Code of Ethics was established in 2009 as the basis
for the committee, detailing the activities of its members.
The document was last updated on June 3, 2013 to include the directors under the applicable categories and adapt
the content in line with the new vision, mission, framework
of values and commitment of Entel and its subsidiaries, following the integration of the fixed and mobile businesses.
To continuously monitor the company’s performance, the
CEO reports the most important management issues on a
monthly basis and the corresponding assessments establish steps to ensure compliance with the company’s goals
and objectives.
The Code of Ethics also covers updates to corporate governance guidelines and the approval and consolidation in the
Corporate Governance Manual of the self-assessment measures set out in General Regulation No. 341 of the Chilean
Superintendency of Securities and Insurance.
By law, Entel has a Directors Committee, which is responsible for representing the interests of minority shareholders.
31
Farmer in Bahía Murta
(Aysén Region), who
can now communicate
with his family thanks
to the connectivity
provided by the Todo Chile
Comunicado project.
ment systems and internal auditing, and potential conflicts
of interest regarding the audit company or its staff, in terms
of the provision of other services to the company or the
companies in its corporate group.
Criminal Liability of Legal
Entities
Regarding the criminal liability of legal entities for certain
offenders, the company has established the offense prevention model set out in Act No. 20,393, with the Head of
Internal Audit responsible for ensuring the model works
correctly.
Strategic risks
In partnership with the consultancy firm Deloitte, the company has drawn up a map of the main strategic risks faced
by the business, together with plans for their mitigation.
Internal audit area
Entel also has a Corporate Internal Audit Department responsible for ensuring the effectiveness and efficiency of
its internal control system, identifying any risks in a timely
manner and recommending actions to mitigate them.
Additionally, the Board of Directors and the Directors Committee meet with the external auditors at least twice a year
to review matters such as the annual audit program, any
discrepancies detected in accounting procedures, manageAnnual Report 2014 - For Translation Purposes Only
32
Corporate Best Practices
On March 31, 2014, Entel submitted information to the Chilean Superintendency of Securities and Insurance on corporate governance practices adopted by the company in line
with the provisions of General Regulation No. 341.
Remuneration of the Board
The remuneration of the directors (detailed in the table below) is approved on an annual basis at the General Meeting of Shareholders. None of the members of the board of
directors or the organization’s executives are remunerated
with stocks and shares in the company or for their work as
directors of subsidiary companies.
NAME
60
reports made to the Ethics
Committee in 2014.
100%
of reports were analyzed
and proceeded to
investigation.
95%
of reports received in 2014
were closed during the
same year.
Tax ID
2014 (CLP th)
2013 (CLP th)
Juan Hurtado Vicuña
5.715.251-6
73,455
70,500
Luis Felipe Gazitúa Achondo
6.069.087-1
69,273
66,478
Raúl Alcaíno Lihn
6.067.858-8
33,573
34,235
Juan Bilbao Hormaeche**
6.348.511-K
35,658
36,261
Richard Büchi Buc
6.149.585-1
49,335
48,348
Juan José Claro González*
5.663.828-8
11,332
32,221
Andrés Echeverría Salas
9.669.081-9
33,534
36,261
Juan Mac-Auliffe Granello
5.543.624-K
37,785
35,254
Alejandro Pérez Rodríguez
5.169.389-2
50,380
48,348
Bernardo Matte Larraín
6.598.728-7
21,162
-
415,489
407,906
Total
* Juan José Claro González ceased to be a director in April 2014.
** Juan Bilbao Hormaeche tendered his resignation on December 23, 2014.
During the financial year, the Directors Committee did not incur any expenses or contract any consultancy services.
Investor Relations
Corporate Reputation
Entel has an investor relations area that is responsible for
providing the information required by the financial market
and disclosing information about the company to comply
with current regulations. The relevant information is also
published online at entel.cl/inversionistas.
Entel maintained its position as the telecommunications
company with the best corporate reputation in Chile in the
Merco corporate reputation ranking. Now in its fifth year, the
study ranked the company 11th among the 100 companies
that were evaluated, based on responses from 430 directors
from corporations with a turnover above USD 30 million.
The analysis was carried out by 368 experts, who evaluated
aspects such as financial results, information quality, commitment to the community, the quality of the workplace and
the products and services provided.
33
01.
02.
03.
04.
05.
06.
07.
08.
01
Company Information
Board of Directors
01
Juan José Hurtado Vicuña
Chairman
Civil Engineering, Universidad de Chile.
Tax ID: 5.715.251-6
02
Vice Chairman
Business Studies, Universidad de Chile.
Tax ID: 6.069.087-1
03
Director
Business Studies, Universidad de Chile.
Tax ID: 6.598.728-7
04
Richard Büchi Buc
Director
Civil Engineering, Universidad de Chile.
MBA, Wharton School of Business,
University of Pennsylvania.
Tax ID: 6.149.585-1
05
Juan José Mac-Auliffe Granello
Director
Business Studies, Pontificia Universidad
Católica de Chile.
Tax ID: 5.543.624-K
06
Director
Católica de Chile. MBA, University of
California, Los Angeles.
Tax ID: 9.669.081-9
07
Independent Director
Industrial Civil Engineering, Universidad
de Chile. Masters in Economics, University
of Chicago.
Tax ID: 5.169.389-2
08
Raúl Alcaíno Lihn
Director
Industrial Civil Engineering, Universidad
de Chile.
Tax ID: 6.067.858-8
35
Juan Bilbao Hormaeche
Director
Católica de Chile. MBA, University of
Chicago.
Tax ID: 6.348.511-K
Note: Resigned as a director on December 23, 2014.
01
Company Information
Management
Entel’s business is structured around the different market
segments in which it operates: Consumer, Enterprise and
Corporate. Each division has its own teams for innovation
and product development, pricing, marketing, sales, and
customer service. Traditional technology activities (networks, systems, and operations) and the Wholesale Segment are grouped under a convergent Technology and Operations area. Finally, the IT Services area is responsible for
managing, operating and running platforms for processing,
transactions and connectivity (cloud services, data center,
outsourcing).
All units operate under a single leadership and were devised in line with international best practices, anticipating
close integration among different areas as a result of increasing synergies in technology.
Executive Compensation
In 2014, the value of remuneration payments to senior management at Entel was CLP 9,431,287,490, distributed between 104 people (Entel S.A. and its subsidiaries). The total
value of bonuses paid for the year was CLP 5,891,760,626.
Severance pay for 2014 was CLP 549,157,291, distributed
between six managers.
Annual bonuses are paid in line with pre-established formula based on achieving corporate targets for the respective
areas. There is a long-term plan established with a horizon
of at least six years to accrue fixed and variable payments
for meeting targets, with a maximum established for variable amounts. All these payments are included in the values
stated above for 2014.
To correctly handle strategic and management issues, the
executive group has a business-wide governance system
that supports its corresponding responsibilities. Issues
managed in this way include the approval and monitoring
of investments, the control of operations aligned with customer quality targets, the management of human capital and
its associated strategies, and communications.
Workforce
Entel S.A.
Management
Professional and technical
Clerical
Total
Other Call Center
Entel PCS Call Center
S.A. subsidiaries
Perú
Americatel
Perú
Entel Perú
(Nextel)
Total
54
41
18
1
9
26
58
207
2,039
1,337
191
34
253
89
163
4,106
795
1,102
1,685
269
2,058
204
1,968
8,081
2,888
2,480
1,894
304
2,320
319
2,189
12,394
36
Senior Management
Felipe Ureta Prieto
Finance and Management Control Executive
From April 2005
Various roles at Entel since January 1994.
Juan Baraqui Anania
Risk and Management Executive
From March 2011
Various roles at Entel since 1994.
Business Studies, Pontificia Universidad Católica de Chile.
Tax ID 7.052.775-8
Business Studies, Universidad de Santiago de Chile.
MBA, University of California, Los Angeles.
Tax ID 7.629.477-1
Felipe Straub Barros
Human Resources Executive
From January 2012
Cristián Maturana Miquel
Legal Executive
From March 1994
Psychology, Pontificia Universidad Católica de Chile. MBA,
Universidad Alberto Hurtado / Loyola College, Maryland.
Tax ID 8.131.463-2
Law, Universidad de Chile.
Tax ID: 6.061.194-7
Manuel Araya Arroyo
Regulatory and Corporate Affairs Executive
From March 2011
Various roles at Entel since May 1994.
Luis Cerón Puelma
Internal Audit Executive
From July 1997
Civil Engineering and MBA, Pontificia Universidad Católica
de Chile.
Tax ID 10.767.214-1
Antonio Büchi Buc
Chief Executive Officer, Entel Group
From March 2011
Civil Industrial Engineering, Pontificia Universidad
Católica de Chile. Masters in Economics, University of
José Luis Poch Piretta
Vice President Consumer Segment
From March 2011
Various roles at Entel since February 1993.
Business Studies, Pontificia Universidad Católica de Chile.
Tax ID 7.010.335-4
Chicago.
Julián San Martín Arjona
Vice President Corporate Segment
From December 2006
Tax ID 9.989.661-2
Industrial Civil Engineering, Universidad de Las Américas.
Computer Engineering, Universidad de Chile.
Tax ID 7.005.576-7
Víctor Hugo Muñoz Álvarez
IT Services Executive
From March 2011
Various roles at Entel since August 2005.
Mario Núñez Popper
Vice President Enterprise Segment
From March 2011
Católica de Chile.
Tax ID 8.165.795-5
Alfredo Parot Donoso
Vice President Technology and Operations
From March 2011
Various roles at Entel since January 1996.
Católica de Chile.
Tax ID 7.003.573-1
Patricio Pérez Gómez
Strategy and Innovation Executive
From May 2014.
Electronic Civil Engineering, Universidad Técnica Federico
Santa María. Corporate Senior Management Program,
Universidad de los Andes
Tax ID 7.479.024-0
Structure Chart
Accounting & Auditing, Universidad Católica de
Valparaíso.
Tax ID 6.271.430-1
Industrial Civil Engineering and Masters in Engineering
Sciences, Pontificia Universidad Católica de Chile. MBA,
Universidad Adolfo Ibáñez.
Tax ID: 11.847.168-7
ANTONIO BÜCHI B.
Chief Executive Officer
FELIPE URETA P.
JUAN BARAQUI A.
FELIPE STRAUB B.
CRISTIÁN MATURANA M.
MANUEL ARAYA A.
Luis Cerón P.
Finance and Management
Control Executive
Management Executive
Human Resources Executive
Legal Executive
Regulatory and Corporate Affairs
Executive
Internal Audit Executive
José Luis Poch P.
Mario Núñez P.
Julián San Martín A.
Alfredo Parot D.
Víctor Hugo Muñoz A.
PATRICIO PÉREZ G.
Vice President Consumer
Segment
Vice President Enterprise
Segment
Vice President Corporate
Segment
Vice President Technology and
Operations
IT Services Executive
Strategy and Innovation Executive
37
01
Company Information
Human Resources
In alignment with its business strategy Entel
provides the continuity needed to help its
human capital reach its full potential.
Corporate Culture
»» Launch of the SAP Success Factors platform.
»» 81% of employees agree Entel is ‘a great place to work.’
»» 98% of the workforce is covered by the performance evaluation
system.
»» With an accident rate of 1.39% in December 2014, the
company is comfortably below the average of 2.44% for the
telecommunications industry.
In 2014, efforts were focused on consolidating and ensuring the uptake of Entel’s corporate culture, as set out in its
mission, vision and cultural principles. This was achieved
through a communications program specifically focusing on
12 areas of the country, with experience workshops providing spaces for conversation, analysis and reflection to help
strengthen concepts associated with the corporate culture
among the participants, empowering them as facilitators.
The workshops covered 70% of the workforce in the cities of
Iquique, Antofagasta, Calama, Valparaíso, Viña del Mar, Rancagua, Chillán, Concepción, Temuco, Puerto Montt and Punta
38
Arenas. The program also continued in Santiago, specifically
targeting area managers. A total of 2,650 hours was invested in the workshops, which reached the conclusion that the
company’s strongest cultural value is its customer focus.
New and improved ways of working
As part of the cultural transformation that began in 2012,
the refurbishment of various workplaces in Santiago and
other parts of the country was carried out to meet the infrastructure standard established by the company’s cultural
principles. Four new offices in Santiago, Valdivia and Puerto Montt were refurbished in 2014, benefiting 224 employees throughout the company. The architectural design was
based on the idea that people are the most important part
of Entel and the need for collaborative working, clear and
transparent communication, and the intensive use of technology to meet the challenge of continuous innovation.
Internal Mobility
Industry and economy comparison
Accident rate (Jan 2013 – Dec 2014)
6
5
4
3
2
1
Internal development opportunities were provided to 380
employees in 2014 to recognize the performance of the
Entel workforce. Half were promoted to positions of more
responsibility and the other half took up new roles within
the organization. These figures mean the internal mobility
process benefited 6.7% of the workforce (figures from November).
Recruitment and Staff Turnover
To ensure the highest standards of quality across all processes, all members of the workforce participate in the performance evaluation system during the year.
380
employees benefited from
the company’s internal
development policies.
This is an important part of helping the company retain its
talent. The monthly turnover rate for 2014 was 1.3%, representing the loss of 920 workers.
0
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
2013
INDUSTRY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
2014
ENTEL PCS
ECONOMY
ENTEL SA
ENTEL GROUP
Industry and economy comparison
Absence from accidents (Jan 2013 – Dec 2014)
140
120
100
80
60
To fill these positions and those created by internal mobility,
1,067 selection processes took place between January and
December, helping Entel find the right people to meet the
requirements of the organization.
40
20
0
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
JAN
2013
INDUSTRY
39
ECONOMY
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
2014
ENTEL PCS
ENTEL SA
ENTEL GROUP
Health and Safety
In line with its culture and commitment to safety, Entel has
established an occupational health and safety policy designed to integrate health and safety into all business processes.
The company has a preventive occupational health and safety management system in place for contractors and 223
companies were registered for the management and development of risk prevention as of December 2014. The initiative also maintains a high technical standard of safety, setting out the risks associated with the 29 most critical tasks
in terms of risk potential and supporting the companies via
the risk prevention officers, supervisors, peer committees
and employees.
Initiatives of this nature and the company’s approach to risk
management have contributed to keeping the accident and
absence rates low (1.39% and 31%, respectively, as of December 2014).
According to statistics from the Chilean Safety Association
(ACHS), as of December 2014, the company’s figures were
comfortably below the average for the telecommunications
industry (2.4% for accidents and 57% for absence).
This track record has led to Entel chairing the round table
on safety for the telecommunications industry, run by the
Chilean Safety Association and involving the most important
companies in the industry.
40
In 2014, Entel also established a selective group of the 15
leading companies in terms of occupational health and risk
prevention.
Quality of Life Benefits
In the interests of the wellbeing of its employees, the company provided a number of benefits to improve their quality
of life, investing CLP 3,773 million on health programs for
employees and their families (60% of total expenditure on
benefits).
Employee Relations
The company has a high percentage of union membership,
which stood at 72.5% as of December 2014. This figure for
union membership is among the highest in Chile, far above
the national average.
The number reflects the company’s belief that working together with its staff is key to its growth and progress. In
this respect, each of the organization’s union leaders plays
a relevant role.
The company also has a policy of maintaining good employee relations and has always engaged in constructive dialog
with staff representatives.
There were no instances of collective bargaining in 2014.
2,187
employees
received training in 2014.
Working Environment
Skills Development
Efforts to fully develop human capital were reflected by the
Great Place to Work survey, which saw the participation of
88% of the workforce in 2014. In this recent measurement,
81% of employees agreed with the statement Entel is ’a
great place to work.’
Six training programs were designed with the support of the
Human Capital Committee to respond to the specific needs
of different business units. To help grow the business and
develop staff, in 2014, the company invested CLP 1,294 million in training programs covering 40% of the workforce
(2,187 employees) through courses and workshops that totaled 72,766 person-hours.
The quality of the working environment was also made
clear by the participation of more than 5,000 people in the
Chilean Independence Day Activities throughout the country,
530 families in the Christmas celebrations in Santiago, and
61 male and 9 female teams in the Table Football Championship. There was also a significant increase in staff participation in our corporate volunteering programs. A total of
547 people participated in Tengo Una Idea, an increase of
30% from the previous year, while 780 people participated
in Children’s Day and 890 in the Christmas celebrations, increases of 24% and 9%, respectively, from 2013.
Performance and compensation
1.39%
accident rate, significantly
lower than the industry
average of 2.46% (source:
ACHS).
98%
of the workforce was
covered by the performance
evaluation process.
In 2014, 98% of the workforce participated in the performance evaluation process, with the relevant monitoring
stages throughout the year. This helped Entel consolidate a
management model based on corporate competencies.
To recognize the performance of its employees, the company has designed a management by objectives compensation system, which applies to 13.3% of the organization
(executives, deputy executives and area managers). This is
complemented by a variable incentive program based on
productivity targets at other levels.
These initiatives were complemented by certification processes to meet the requirements of individual units, including the recertification of Entel as a Cisco Gold Partner and
the new certification of Entel as a Cisco Master Partner.
Additionally, 2014 also saw the optimization of the ITIL certification program through the implementation of reports
given by professionals from the company, resulting in the
certification of 73 members of staff.
The year also saw the launch of the Sustainable Data Center
certification process, in line with the standards established
by the Uptime Institute. This involved the design of training
programs to help maintain the knowledge required for the
sustainable management and operation of data centers.
World-Class Tool
In 2014, Entel’s talent management system began to operate under the SAP Success Factors platform, a worldclass people management standard. The software allows
the integrated operation of processes and provides each
department with instant, direct access to the information
required for making decisions related to the development
of its staff.
This structure and the associated management model make
it possible to define salary bands for all roles and their respective levels of development. The model has allowed Entel
to continue making progress in the professionalization of
compensation management, improving internal equality
and market competitiveness.
41
teamwork,
integration and
collaboration
Enterprising spirit
Ethical
transparent
people reaching
their potential
Excellence,
quality and delivery
Passion and
persistence
42
Customerfocused
Innovation and
adaptation
Corporate Culture
Entel’s system of
values is based on
seven principles
1.
2.
3.
4.
5.
6.
7.
Excellence, quality and delivery
We take responsibility for our decisions and actions, with a commitment to delivering the
highest standards of service, both externally and internally, never losing sight of the fact that
our commitments also affect those made by others. We are continuously working to strengthen our leadership.
Customer focused
Our work is always based on what the customer values and expects to ensure we meet their
expectations. We are always guided by how the end result of our actions and decisions will
affect them. In this way, we aspire to build trust with our customers in long-term relationships that allow us to understand and anticipate their needs.
Ethical and transparent people reaching their full potential
We promote an atmosphere of understanding, openness, sincerity, loyalty and honesty. We
aim to create a demanding, stimulating and enjoyable environment that allows people to
reach their full potential and grow in the broadest sense.
Teamwork, integration and collaboration
We work with a team spirit, focusing on the bigger picture to achieve common goals. Transparency, openness, honesty and integration with the rest of the company are essential. We
aim to promote relationships that favor collaboration and learning across different areas of
the business, always willing to help and share information, knowledge and experience.
Innovation and adaptation
We experiment with new ways of doing things and encourage others to experiment, challenge
and put forward ideas. We accept errors as learning opportunities and are open to change.
We encourage staff to evaluate and review their actions because it’s always possible to learn
and improve on what we do.
Passion and persistence
We undertake initiatives with energy and enthusiasm, always with a positive attitude. We are
always ready and willing to help, motivated both by goals and the paths that lead to them.
We know things will not always be easy and understand the need to learn and adapt along
the way.
Enterprising spirit
We are proactive in our approach to solving problems, prioritizing, simplifying and focusing
on what delivers the best results. We take initiative and push things forward to ensure they
are done with energy, while taking any risks into consideration.
43
01
Company Information
Corporate Image
After 50 years, Entel remains the leading telecommunications brand
in Chile, thanks to its
ability to provide the highest quality communications and coverage, advanced technology,
and close relationships with its customers.
Positioning: awareness and Preference
»» Reinforcement of leadership in brand recognition and preference
with a Top of Mind of 46% (mobile).
»» Entel completed the change of brand from Nextel to Entel in Peru,
transforming the company into a regional name in Latin America.
»» 11th year as official sponsor of the Chilean national soccer team.
In 2014, Entel celebrated 50 years as one of the most solid
brands in the Chilean market. The year was marked by high
levels of competition and a slowdown in the telecommunications industry against the backdrop of a less dynamic
economy and changes in some business segments. In spite
of this challenging outlook, the company held and even extended its leadership in terms of an analysis of available
brand image measurements for other telecommunications
operators in Chile.
»» Consolidation of major entertainment and sports events.
Market research for the Consumer Segment shows Entel
retained its leadership in the Top of Mind mobile survey
throughout 2014, finishing the year on 46%, compared to
44
43.5% in 2013, 17 percentage points ahead of the next best
competitor. The company achieved a similar difference in
surveys measuring brand preference, with a rating of 46%,
compared to 29% for its closest competitor.
Attributes
Entel’s mission is to help people live better connected and
in 2014 the company continued to strengthen the attributes
of its brand that reflect this objective and are consistently
associated with the company by its users: better quality of
communications, better coverage, advanced technology and
a close relationship with customers. All this is aligned with a
business model supported on three principles: high quality
services, the best network infrastructure and a high level of
innovation.
Regional expansion
After nine months of preparations, the company completed
the change of branding from Nextel Perú to Entel in October 2014. This milestone marked the launch of operations
in the Peruvian market under the Entel brand, following
the company’s entry in 2013 with the acquisition of 100%
of shares in Nextel from the North American company NII
Holdings.
The transaction represented the regional expansion of the
Entel brand, which is strongly positioned for growth in Peru,
a market with high potential.
Communications
The end of 2014 was marked by a campaign based on the
concept of connecting Chileans for 50 years to commemorate the five decades of the company’s history, reinforcing
its brand image and seeking to highlight the support Entel
has provided in the development of the country. This complements other activities throughout the year, including
strategies developed to advertise the company’s new mobile multimedia plans and the first national campaign for the
Entel Hogar segment based on the slogan ‘Entel is here to
give your home more life.’
Aware that the attribute of close customer relationships is
based on contact with customers throughout the country, in
2014, the company continued to strengthen the relationship between consumers in Chile and the brand with a wide
range of events and sponsorships. This activity was complemented by the Entel Zone reward scheme, which provided
benefits to 8 million customers during the year.
In terms of sports, in 2014 Entel accompanied fans of the
national soccer team at the World Cup in Brazil. As official
team sponsor, Entel was there with fans as they followed its
progress minute-by-minute over various platforms. Based
on the image of midfielder Arturo Vidal, whose performance earned him the nickname ‘King Arturo,’ Entel was there
with fans who stayed home, as well as those who traveled
to support the team, connecting the whole country as it was
gripped by the team’s achievements.
Seeking to capitalize on the importance of sport to Chilean
society, Entel also sponsored the Santiago Marathon 2014,
Mountain Bike Challenge (for the sixth year) and RallyMobil,
which brought passion for the extreme sport to Chile, with
Entel taking part via the Entel Xperia team. All this, without
forgetting the support the company provides to regional
sporting teams.
In terms of entertainment, Entel has continued its partnership with the leading promoters of events such as Time4Fun and Street Machine, and has reinforced its position as
a sponsor of high-quality events, such as Cirque du Soleil,
Creamfields and Mysteryland. The company also supported
concerts by Avril Lavigne, Metallica, One Direction and two
other artists in 2014, on many occasions offering our customers exclusive advance ticket sales.
The company has also continued to provide support in the
country’s regions, bringing Chile together with shows, sport
and healthy living events. Our popular ‘Tour Días e)’ has
45
2,500
enterprise customers in 10 cities
benefited from the Entel Empresas
tour.
become a major family event, with activities including performances by well known Chilean artists, as well as family
races and cycle runs.
Regional events and sponsorships are also extremely important. The company had a presence at the main activities in each part of the country, including El Champion in
Rancagua, the Festival de La Pampilla in Coquimbo and the
Semanas Musicales in Frutillar. Providing support to municipalities and local organizations helps create a stronger
link with current and potential customers throughout the
country’s regions.
Finally, in 2014, to mark the end of the year, the Entel Tower
celebrated the company’s 50th birthday with the traditional
end-of-year fireworks display in Santiago for the 23rd year,
attracting a crowd of 400,000.
358,664
Twitter followers
633,482
Facebook fans
Business Events
Following the path established in the first 50 years of its
life, Entel remains focused on contributing to the country’s
growth through infrastructure, services and innovation.
In 2014, it repeated its annual Entel Empresas Tour, making
direct contact with around 2,500 business customers in ten
cities throughout the country, with informative presentations on innovative tools to help drive local businesses. This
was complemented by the ‘Connected Companies: The Future Is Now’ event, which took place in seven cities.
Head of Barcelona City Council’s Municipal IT Institute, Martín Umarán, Co-founder and Chief of Staff of the software
company Globant, Edward Martínez, Vice President and CIO
of Miami Children’s Hospital, and Fernando Beltrán, Engagement Manager for Walt Disney World Parks and Resorts.
Entel also sponsored around 50 events for SME customers
in the Enterprise Segment.
Online Marketing
In 2014, the digital world ceased to exist in isolation from
mass communication. The year saw the continuation of a
trend that began in 2013, driving the integration of online
and off-line communication, together with the use of e-commerce and e-care solutions to promote the online channel
as a platform for services and transactions.
All communications activities are now subject to integrated
planning and Entel is working to take advantage of connectivity to provide users with more content.
To develop platforms for improved customer service and
the creation of content, Entel created an exclusive support
YouTube channel and an Entel fanpage for providing customer service, as well as the elhincha.cl soccer website,
which was particularly popular during the World Cup and
remained active with national league games. Additionally,
initiatives such as the #voyallegar docureality were highly
popular, helping successfully integrate online and off-line
channels.
The year also marked the seventh Entel Summit. The keynote speaker for 2014 was Joi Ito, a technology entrepreneur
and director of the MIT Media Lab. The event, which has become the annual highlight in the segment, took place in October in partnership with strategic suppliers and was based
around the theme of ‘toward total connectivity.’
Ranked by Businessweek as one of the 25 most influential people on the web, Ito was joined by Manel Sanromà,
47
48
50 _
YEARS
A tower that brings us closer to everyone
At a height of 127 m, the Entel Tower is a powerful symbol of our mission to stand out through
innovation. Born of the objective to create a central node in the company’s telecommunications
system, the construction was a considerable feat
of engineering and the tower remained the country’s tallest building for some 20 years. In 2014,
it celebrated its 40th birthday and has now been
connecting Chileans for four decades.
1974
49
02
Strategy
Infrastructure
The capacity and performance of its networks and data
centers a
re essential in providing
Entel’s customers with a distinctive experience. In 2014 the company continued to
strengthen its infrastructure in Chile and Peru, investing a total of USD 893 million
throughout the year.
»» Project for mandatory areas and minimum coverage on the 2,600
MHz band.
»» Award of 700 Mhz spectrum.
»» Expansion of capacity, new carriers and technology sites for 3G.
»» Rollout of mobile infrastructure for Entel Perú.
Investment 2014
USD million
Mobile services
371.3
Fixed services
129.2
Customer projects
93.0
Call Center and Americatel subsidiaries
12.1
Entel Perú
286.9
TOTAL
892.5
Investment
Entel continuously invests in networks, platforms and data
centers to ensure it continues to provide a first-class service to our customers using its own cutting-edge infrastructure. In 2014, the company invested a total of USD 893 million
in infrastructure.
50
This investment includes USD 313 million for expanding
and maintaining mobile network infrastructure in Chile, including USD 48 million for the project to provide coverage
in mandatory areas and minimum coverage as part of the
company’s acquisition of spectrum on the 2,600 MHz band.
A further USD 108 million was invested in fixed network infrastructure, targeting specific areas with latest-generation
fiber-optic technology, and projects for customers in the Enterprise and Corporate segments.
To support the growth of the IT business, USD 29 million
was invested in infrastructure expansion projects, adding a
further 1,000 m² to Building 2 at Ciudad de los Valles and
beginning work to fit out 300 m² at the Amunátegui data
center, Tier III certification from the Uptime Institute for the
second floor of Ciudad de los Valles 2, additional improvements to on-demand platforms at all our data centers, and
customer projects.
100%
of mobile sites in Peru are
connected using the microwave
network.
A total of USD 49 million was also invested in platforms for
systems and equipment to support technical and commercial operations (an increase of USD 10 million from 2013).
USD
893
million
invested in infrastructure.
Transport Networks
Network expansion in Peru
In 2014, Entel continued to expand its 2G and 3G voice and
data networks on the 1,900 MHz spectrum awarded to the
company in 2007.
The process, which aims to significantly increase coverage throughout the whole of Peru towards the end of 2015,
is based on design criteria and population and geographic
segmentation. However, in addition to the criterion of coverage, the system is also designed to deliver standards of
quality in a similar way to the criteria used in Chile. This has
almost doubled the number of antenna Points of Presence
(PoPs) in Peru to 1,700 throughout the country, and the creation of seven new PoPs on the core network.
4G Services for Entel Perú
Following the award of Block B of the AWS band (40 MHz) to
Entel’s Americatel Perú subsidiary in a tender process run
by the Peruvian authorities for the rollout of LTE services,
the company began to provide data services, expanding its
range of mobile access technologies. The 4G services were
rolled out in parallel to the 2G and 3G networks, using active
antennas and single RAN, latest generation technology that
optimizes investments and reduces implementation timescales and future operating costs.
Fiber Optic Network Expansion in Chile
In 2014, Entel continued the expansion of its GPON fiberoptic network that began in 2010 to increase coverage and
service capacity in the Enterprise Segment. Upon completion of these activities, a total of 25,000 businesses were
passed in 2014, including horizontal and vertical roll out in
commercial buildings, making a total of 66,000 businesses
passed to date.
Fiber Optic
The trunk fiber optic network runs for more than 5,000 km throughout
the length of Chile. It uses SDH and DWDM transmission technology
to reach transport speeds of up to 400 Gbps. The network is primarily
used for the IP/MPLS network for fixed and mobile services. In 2014,
the company increased the proportion of fiber optics cables to 75%
as part of its transmission plans towards IP traffic aggregation points.
To separate access layers and trunk networks (north and south),
Super Core topology is used to interconnect three core PoPs (CNT,
CDLV and a third point), allowing them to function logically as part of
a single, highly scalable PoP and reduce vulnerability by avoiding the
concentration of traffic in a single location.
Microwave
The microwave network is currently used as a branching and access
network, largely for connecting rural areas to the fiber optic trunk
network.
It has national coverage and is used to interconnect the access network, mainly to provide mobile phone and wireless data services. The
trend is for the migration of this network to the IP protocol, gradually
decommissioning legacy nodes.
Satellite
The Entel satellite network has 18 land stations distributed throughout Chile, covering isolated areas such as Puerto Williams, Villa
O’Higgins and Easter Island.
In 2014, satellite capacity on Easter Island was increased from 120
Mbps to 150 Mbps (upstream and downstream). Entel was also awarded the concession for the intermediate telecommunications service
for Easter Island (a Telecommunications Development Fund Project),
which will deliver satellite capacity of 250 Mbps (175 Mbps upstream
and 75 Mbps downstream, helping improve the services available on
the island.
The network uses the capacity of the Intelsat and Telesat satellite
systems to provide telephone, data, and transport for digital television and audio signals.
Entel also operates a VSAT platform for private LAN/IP and Internet
traffic using DVB technology.
51
Access networks_
xDSL Access Network
The xDSL access network provides coverage in 142 districts throughout the country, making it possible to offer voice, data and Internet
services through a wide range of products.
Investment in the network is focused on increasing speeds and the
quantity of services, as well as upgrading equipment.
MPLS Access Network
For both core and access, the MPLS network has evolved to use gigabit Ethernet connections throughout the country to provide dedicated,
high-availability voice and data services.
Entel currently has around 766 PoPs with Switch/MPLS services in
300 districts. The Metropolitan Region has a high-redundancy Metro
Ethernet network, comprising primary optic rings of up to 10 Gbps
and secondary high-speed Ethernet rings to provide access for mobile and private services.
GPON Network
In 2014, the GPON fiber optic network for serving customers in the
Enterprise Segment had over 66,000 businesses passed (including
micro enterprises) helping reinforce coverage in 36 districts throughout the country.
2G Mobile Network
The 2G mobile network continues to play an important role in the services with which Entel provides its users. The company’s 2G network
uses GSM/GPRS/EDGE technology at all its PoPs and is specifically
designed and configured to support voice services, although it can
also support data with average connection speeds of 100 Kbps. It is
currently mainly used for M2M connections.
3G Mobile Network
The 3G network serves as a platform for mobile broadband and voice
services for customers with 3G devices, as well as data services for
smartphone customers.
The technology provides theoretical peak data transmission speeds
of 42 Mbps downstream and 5.7 Mbps upstream.
The 2G and 3G mobile access network has around 5,500 network PoPs.
The company is continuously increasing the capacity of this network
to satisfy the constantly growing demand for traffic. In 2014, around
478 new 3G sites were added on the 1,900 MHz band and 203 on the
900 MHz band.
52
LTE Mobile Network
The rollout of Entel’s fourth generation mobile network began in 2013
with the spectrum awarded on the 2,600 MHz band in August 2012.
In March 2014, Entel completed work on the 2,600 MHz LTE sites for
commitments made to the Department of Telecommunications, taking the total number of sites to 880. A further 50 LTE sites were
rolled out in six clusters of commercial interest, four in Santiago and
two in the O’Higgins Region. Entel plans to continue gradually increasing this number with a larger-scale rollout of LTE made possible by
the award of new LTE spectrum on the 700 MHz band.
Data Center Network
Entel has seven data centers interconnected by IP/MPLS/DWDM fiber
optic networks. The centers are named according to their location:
Amunátegui, Pedro de Valdivia, Ñuñoa, Longovilo, Vicuña Mackenna
and Ciudad de los Valles (1 and 2).
A total surface area of over 7,500 m² has already been fitted out at the
data centers, with a master plan for growth of up to 11,675 m². Data
centers are used to provide outsourcing services for IT operations,
ranging from housing to more complex services involving the operation and running of platforms to support the business applications of
our customers.
Data center services are designed for companies looking to maximize the availability of business-critical applications, improve security
levels and the protection of critical information, and make considerable reductions to investment in infrastructure when compared to
the levels an average customer would require to obtain an equivalent
service with their own resources.
7,500
m2
of data center space fitted out
Entel Perú Infrastructure
Mobile network
1,900 MHz 3G network (UMTS) with 1,713 sites throughout the country (905 in Lima). Coverage in Lima and Callao is around 90%.
iDEN network (800 MHz), known as the PTT (Push-to-Talk) network.
Entel Perú has 637 sites throughout the country, including 455 in
Lima.
Mobile Spectrum
Entel Perú has the following spectrum for its services:
»» 800 MHz, used for the Motorola PTT service (iDEN).
»» 1,900 MHz, used to provide 3G mobile voice and data services.
»» 2,500 MHz and 3,500 MHz, used by Americatel Perú for WiMAX networks.
»» AWS (1,700–2,100 MHz), acquired by Americatel Perú in 2013 to provide LTE services for Entel Perú.
Transmission
All mobile sites are currently connected using the microwave network.
Entel Perú does not have a fiber optic network.
Ciudad de los Valles data center.
53
02
Strategy
Customer Experience
The goal of providing a distinctive, world-class service lies at the heart of Entel’s strategy. In
2014, the company advanced this vision, working to incorporate customers’ needs across
the business and over a range of channels.
»» Ibero-American Best Customer Experience award for 2014 in the
telecommunications category / Best Customer Experience Study
(BCX) undertaken by IZO.
»» National Best Customer Experience Award for 2014 in the
telecommunications category / Best Customer Experience Study
(BCX) undertaken by IZO.
»» ProCalidad National Customer Satisfaction Award for the 12th
consecutive year / First place in the mobile category.
»» Company with the least number of complaints received by the
Department of Telecommunications as a proportion of the number
of users, based on its 2014 study.
»» Leadership in customer satisfaction in all markets, according to
monthly and annual studies by Adimark GFK.
partner, Vodafone, the world leader in mobile communications.
Entel’s vision of a distinctive experience is supported by
various principles. The most important is the continuous
investment in infrastructure and technology for networks,
data centers and platforms, which are all key factors in providing connectivity and ensuring service quality. The design
and operation of networks and platforms is always focused
on using technological expertise to provide a desired level
of experience.
Another important factor is the systematic adoption and
application of best practices as part of direct relationships
with customers, both in terms of project management and
sales/post-sales processes. This covers the use, training
and maintenance of different methods and systems, such
as the ISO 9001 Quality Management System, ITIL practices
and COPC certifications.
Consumer Segment
Approach
Entel’s vision is to be a world-class service company. To
achieve this vision, the company systematically and continuously manages customer experiences in all the segments
in which it operates based on an integrated point-to-point
vision of each customer journey.
An important tool in this area is continuous international
benchmarking, largely undertaken with Entel’s strategic
54
The management of customer experience in the Consumer
Segment is monitored in three main areas: the relationship
with the Entel brand; the use of services; direct interaction
with the company through personal contact via in-person
and remote channels.
In 2014, the company made progress in the program to
transform its stores that began in 2013 and is set to continue over the coming two years. The initiative aims to make
Overall satisfaction – prepaid customers
Consumer Segment
70.0
66.7%
67.2%
63.8%
Overall satisfaction – postpaid customers
Consumer Segment
64.6%
64.8%
70.0
60.8%
60.0
60.0
25.0%
24.1%
28.6%
50.0
27.1%
29.2%
57.2%
42.6%
35.2%
30.0
40.0
42.2%
35.4%
37.7%
55.5%
50.0
30.8%
40.0
33.6%
43.5%
38.4%
26.4%
20.0
10.0
10.0
0.0
Dec 12
Jul 13
Dec 13
ENTEL
Jul 14
Dec 14
stores more spacious, with areas where customers can
experience devices and receive integrated service from advisers throughout the full purchase process. Over the last
year, the company transformed four stores under this new
concept, complementing the six stores transformed in 2013
and the first stores remodeled under the pilot scheme in
2012. Six more stores are planned to be converted to this
new service model in 2015.
A further 33 express stores (smaller franchises) were remodeled in 2014 to improve the customer experience in this
format and continue the development of this channel, which
finished 2014 with 197 stores throughout the country.
This channel complements Entel’s 33 directly operated stores, providing longer opening hours and increased coverage, making it possible to reach all our customers with an inperson channel for sales and service. This year the express
channel has increased the range of services it provides to
include more transactions, helping build closer customer
relationships and increase levels of satisfaction.
Entel has continued to develop its multi-channel model to
realize its vision of providing world-class service. Under this
model, the customer decides where they will receive service, with the company aiming to provide the best possible
service over all channels. Over the last year, operational satisfaction indicators show satisfaction among customers interacting through Entel channels has increased by an average of four percentage points. The call center channel stands
27.1%
22.6%
19.5%
Dec 12
18.2%
Jul 13
Dec 13
ENTEL
CLOSEST COMPETITOR
Source: Adimark GFK, Internal Mobile Services Customer Satisfaction Tracking.
32.9%
30.0
20.0
0.0
61.7%
57.8%
Jul 14
Dec 14
CLOSEST COMPETITOR
Source: Adimark GFK, Internal Mobile Services Customer Satisfaction Tracking.
out for a 10 percentage point increase with respect to the
previous year, together with the Interactive Voice Response
103 channel (for transactions and self-service), which registered a change of 12 points with respect to 2013. In terms of
stores, customer satisfaction levels for Entel’s own stores
increased by nine percentage points.
Enterprise Segment
The Enterprise Segment began a process to transform the
customer experience under an approach based on the concept of journeys (the customer’s experience when they interact with the company to fulfill a need from start to finish).
The company undertook a diagnostic to help design and implement the Large-Scale Fixed-Line Services Quotation and
Provision Process, increasing satisfaction levels by 58% at
the end of the year, with respect to the start of the transformation. The transformation of two other processes for fixed
services is now underway.
In terms of coverage models for the different segments, new
management practices were implemented, standardizing
the working method based on best practices and daily monitoring of the management of business managers based
on KPIs and challenging targets, which help stimulate discipline and efficiency. The coverage model for the SME sector was also redesigned based on its objectives in terms of
experience: resolving problems, accessibility and advising
the customer on the range of mobile, fixed and IT services.
55
Two exclusive business centers were opened in Santiago to
provide service to businesses customers without a dedicated manager based on scheduled appointments. Satisfaction in these centers was much higher than expected, exceeding the target by 15%.
were made to the Telco incident service procedure to align
it with the needs of its users. The method for prioritizing
the most critical problems was changed and a help desk for
the closure of incidents was set up as a proactive means to
check that service has been restored to customers.
In terms of overall satisfaction, Entel maintained its leadership in this segment, achieving an overall satisfaction level
of 53% for mobile services, seven percentage points clear
of the industry average. The company also maintained its
leadership for fixed services, with an average satisfaction
level of 61% for the year.
All these actions have been highly appreciated by users and
are reflected in increases in satisfaction indicators.
Corporate Segment
In 2014, the Corporate Segment continued the project to
transform customer journeys, focusing on the voice of the
customer, the vision of the organization and analyzing process efficiency as a means to improve service satisfaction.
During the year, the Corporate Segment implemented the
new CAT Corp technical support telephone platform to provide a distinctive and dedicated response for users for the
resolution of technical incidents for mobile services.
Wholesale Segment
In 2014, a quality area was created in the Wholesale Segment
and the newly created Wholesale Roaming Department was
launched with responsibility for ensuring maximum levels
of service for Entel customers using international roaming
services, as well as customers from other countries who
choose Entel as their preferred network during their time
in Chile.
To continue improving the experience of Entel customers
using international roaming services, the company is developing channels to gather feedback on user experiences and
improve the timescales for solving any problems that arise.
The design and operation of CAT Corp is focused on the
customer and the specific procedures, communication protocols and metrics that have been defined as part of a cocreation process involving customer requirements in terms
of agility and quality.
A panel of key indicators was devised to monitor service
quality based on real tests carried out on international mobile operator networks that provide Entel with roaming services in various countries. The results were used to implement various focused and proactive improvement actions.
Reflecting the fact that the continuous improvement of
processes forms part of the company’s DNA, modifications
The company made technical improvements and optimizations to support the increased traffic envisaged from the
56
soccer World Cup in Brazil, making it possible to provide
those traveling to the country with good browsing and voice communication experiences. The year also saw the start
of activities to enable Entel customers to use 4G services
when they are abroad.
Online Experience
51.6%
customer satisfaction in the second
half of the year, leading the industry,
according to the Department of
Telecommunications.
As part of the company’s overall strategy to deliver the best
possible experience over its communications channels, the
online channel is playing increasingly important role in all
the markets and segments in which Entel is active.
More than 4,000 consumers were surveyed in Chile to determine their opinion based on their experiences with respect to the Entel brand and its products and services.
National Customer Satisfaction Award
Reaffirming Entel’s leadership in service quality, the company came first in the mobile category of the National Customer Satisfaction Award run by ProCalidad for the 12th
year in a row. It is the only ranking to analyze the satisfaction of Chilean consumers in 25 service sectors based on
over 30,000 direct surveys during the year.
In 2014, the company continued to make improvements to
content and ensure the simple and transparent delivery of
information to its customers, both over the traditional web
and via mobile devices. It also improved the user experience of the My Entel portals for the Consumer and Enterprise
segments to facilitate online self-service and allow customers to contract new products and services.
Reduction in Complaints
Complementing its range of digital channels, in 2014, the
new Entel App was launched for iOS and Android smartphone. The app provides users with access to information and
transactions at any time and achieved a high level of penetration in the space of just a few weeks.
In the last ranking, Entel had the lowest number of complaints received by the department as a proportion of the
number of users (0.7 per 10,000 customers), compared to
other companies with their own telecommunications networks in Chile.
In terms of social networks, Entel provides personalized
support over Facebook, Twitter and YouTube, helping meet
the needs of different types of customers as quickly as possible.
Similarly, the network quality indicator for mobile voice
services registered 99.3% of calls successfully made with
respect to the total number of attempts, the highest among
the companies measured and consistent with Entel’s commitment to help customers live better connected. The indicator is measured through Drive Test measurements
for four areas of the Metropolitan Region (La Florida, Maipú, Pudahuel and Puente Alto) performed simultaneously
outdoors under equal conditions for operators with their
own networks (2G and 3G), with an average of 400 measurements per operator.
Customer Experience Award 2014
For the third year running, Entel won the Best Customer
Experience award for the telecommunications category in
Chile. The prize was awarded based on the results of the
Best Customer Experience study (BCX) by the consultancy
firm IZO, based on a sample of more than 13,000 consumer
opinions from around 130 companies in various sectors in
Brazil, Chile, Colombia, Spain, Mexico and Venezuela.
Entel’s aim to continuously improve its customer experience is reflected in the significant improvement in complaint
levels for 2014, according to the ranking of complaints for
the mobile market by the National Consumer Service and
the Department of Telecommunications.
In terms of customer satisfaction, the Department of Telecommunications study includes a user satisfaction indicator, for which Entel was ranked first in the second half of
2014, with a score of 51.6, reaffirming the company’s leadership with respect to other operators in the country in
terms of service.
57
58
02
Strategy
Innovation
Innovation is what allows Entel to create a distinctive and
transformational source of value,
driven by and working for people, located at the point where technology and business meet.
»» Best Place to Innovate award for 2014 in the ranking of the 50 most
innovative companies by the Faculty of Economics and Business at
the University of Chile, the Chilean Economic Development Agency
(CORFO) and the research company Cadem.
seek new opportunities to provide a better service, regardless of the area in which they work.
»» First in the telecommunications industry in the Most Innovative
Companies ranking for 2014 by the ESE Business School at the Los
Andes University.
Entel also uses its partnerships to analyze global trends in
the industry, allowing the company, together with its partners and allies, to adopt initiatives that contribute to the development of the country and promote its leadership in the
markets in which it operates.
»» Implementation of Intrainnovation initiative.
Ecosystem
»» Creation of electronic invoicing system Facturanet.
The company has three areas responsible for its long-term
strategy: the Innovation Department, the Investments and
Economic Evaluation Department and the New Business
Planning department. The operation of these areas is integrated to support, implement and execute initiatives that
benefit the company.
»» Implementation of Smartparking pilot.
»» Partnership agreement with the Department of Transport to
optimize the management of public transport.
Approach
In an industry driven by technological change and social
trends, innovation plays a crucial role in providing solutions
to meet the needs of customers. Generating innovation is
the responsibility of all the company’s employees and it
company is continuously seeking to reinforce an ecosystem
able to create sustainable and permanent value with clear
focuses and committed teams.
Innovation and the capacity for adaptation are fundamental
aspects of Entel’s organizational culture, which encourages
individual employees to constantly push themselves and
The Innovation Department is responsible for promoting
and maturing innovation within the company, exploring disruptive projects and managing the partnerships required
for their development. Entel has a network that connects
all its employees, helping identify opportunities and develop
projects that create new sources of value and ensure the
company always delivers the best possible service.
The model benefits from a multi-layer approach, with a
Strategic Innovation Committee comprising senior management to track progress in the culture of innovation and
approve the development of disruptive initiatives or projects
with transformational potential, as well as ensuring the
alignment of the different areas of the company.
59
Models of innovation
The company operates under two models of innovation. The
first covers grass-roots innovation and aims to match requirements and opportunities in the different areas of the
company, which can then be taken forward by staff backed
by multi-disciplinary teams. The teams allow employees
to share ideas and work together to find solutions to the
different challenges that arise in the market or inside the
organization.
The second focuses on frontier projects, located at the edges of the company’s core business, which are tackled by
multi-disciplinary teams selected by the Innovation Committee on a case-by-case basis, together with the Innovation Department. Different methods are used to identify and
validate the potential of a given product or business model,
creating prototypes and identifying customer insights.
Objectives of innovation
Facturanet: Turning an obligation
into an opportunity
Technology and services
Introduce qualitative technological leaps that leverage
innovation and allow the company to offer relevant products and services in the individual segments, helping the
company achieve and maintain market leadership of the
Consumer, Enterprise and Corporate segments.
Starting in November 2014, with gradual adoption until
2017, all companies in Chile must now issue electronic invoices under the provisions of Chile’s new Electronic Invoicing Act (No. 20,727). The legislation requires all companies
with an annual turnover of over UF 100,000 to make use of
the system from November 2014.
Processes
Create simple and efficient processes in all areas of the
company, always focusing on the needs of our customers,
both internal and external.
In response to this change, Entel developed the Facturanet
service, which allows customers to meet all the requirements for the creation, transmission, receipt, storage and
recovery of electronic tax documents. The service also has
the advantage of supporting various invoicing models, such
as centralized, branch-based and field sales.
Business models
Create innovative, differential and market-leading business
models and sales channels.
Organizational culture
Develop the required talent, human capital and DNA.
60
In addition to improving the management and efficiency of
business activities, one major advantage of the tool is the
savings it makes possible, helping reduce costs by eliminating postage, paper, processing and storage. The fact that
documents are now available online makes possible a quicker response to customer queries regarding invoices that
have been issued and the system is also more sustainable
and environmentally friendly.
In terms of security, the services are more reliable since
they have mechanisms to verify authenticity and validity for
tax, commercial and financial purposes. This considerably
reduces the risks of fraud and potential errors arising from
the digitization and loss of documents.
Smart Cities Initiatives
Continuing the initiatives connected with the rise of Smart
Cities, which seek to improve people’s quality of life through
the incorporation of technology and efforts in the public and
private sectors, Entel implemented a smart parking pilot in
Santiago’s Las Condes district.
Sensors were installed in parking spaces on two streets adjoining the Apumanque shopping mall and the entrance to
its car park to record information about vehicle movements
and the availability of over 650 spaces.
Users can now check the number of available spaces via a
freely available mobile application and an information panel installed on the street Apoquindo, helping save time and
fuel, and reduce congestion, both on the streets providing
access to the mall and inside the car park itself. This has
improved environmental quality and the health of residents
of the city, reducing CO₂ emissions and the noise pollution
created by traffic.
In 2014, Entel was also involved in the launch of a partnership agreement to optimize the management of public
transport.
The first of its kind in Latin America, the pilot project consists of analyzing large quantities of data generated by the
mobile network activity of users to produce information that
can be used to understand how people move around the city,
identify points for improvement in terms of transport and
help the planning of Santiago.
opened up to the organization as a whole, creating a space
for innovation and the acceleration of ideas with the potential to have an impact on the business.
Recognition
In 2014, Entel was once again included in the Most Innovative Companies ranking for Chile, compiled annually by
the ESE Business School at the Los Andes University. The
company has achieved this distinction on four previous occasions, affirming its commitment to innovation and its continued focus on innovation.
The study measures the efficiency of resources in terms of
innovation, identifying examples of best practices in each of
the companies involved. In the case of Entel, the study noted
the company’s aim to create an innovative culture inside the
business, adapting to new scenarios, creating valuable and
relevant services for customers, and, in doing so, helping
ensure we can all live better connected.
First in industry perception
ranking
In recognition of its policies and initiatives for innovation,
Entel was awarded Best Place to Innovate in the communications industry for 2014, awarded by the Faculty of Economics and Business at the University of Chile in partnership
with the Chilean Economic Development Agency (CORFO)
and the research firm Cadem.
The award is based on the First Perception Ranking by InnovAcción, which recognizes four ascending stages of development: 1) creativity, when innovation depends on the
creativity of a few people; 2) innovation, based on the individual effort of few people; 3) action, the result of the effort of
the organization as a whole; and 4) effective Change, when
innovation is a fundamental part of the way it operates and
incorporates third parties.
Intrainnovation
Entel’s new Intrainnovation initiative was launched in 2014
to incentivize the participation of employees in the innovation process. The company worked directly with a group of
departments and their teams to identify major challenges
and form teams to tackle them. In 2015, the project will be
61
50 _
YEARS
The highest-standards in data centers
Entel’s data center services set a new standard
with the expansion of Ciudad de los Valles. With a
planned surface area of 8,000 m², the data center
allows the company to back up the information of
customers who host their servers there, supporting the development of their businesses with firstclass uninterrupted service.
2010
63
Mule driver in Paihuano,
Coquimbo Region, one of the
1,474 areas to benefit from
the Todo Chile Comunicado
project.
03
Our Business
Industry
We live in a connected world w
ith
mobile data leading growth in the telecommunications
industry, alongside fixed broadband and pay TV, which are increasingly delivered via fixed
and mobile Internet connections.
TB POR dispositivo
Global trends
Global monthly traffic in exabytes
Exponential growth in data traffic
Global data traffic increased by 73% in 2014 and this trend
is expected to continue with an increase of 69% in 2015.
18
15.9 EB
16
This sustained growth has largely been driven by smartphones, which reached a penetration of 44% in Chile in 2014, a
figure that is expected to rise to 50% in 2015, according to
statistics from OVUM. In Western Europe, penetration was
52% in 2014 and is forecasted to rise to 59% in 2015, while
in North America, the figures were 64% and 69%, respectively.
14
12
8
7.0 EB
6
4.4 EB
4
2
0
The tendency for consumers to use multiple devices, such
as tablets, smartphones, PCs and laptops, is contributing to
the growth in data traffic and these devices are creating a
similar increase in traffic to smartphones, but with much
higher initial volumes. However, growth in the number of
these devices has been less than for smartphones, meaning
they are having a less notable impact on total traffic.
10.8 EB
10
2.6 EB
1.5 EB
2013
2014
2015
2016
2017
2018
Source: Cisco VNI Mobile 2014.
Total traffic by device category in terabytes
20,000,000
Data traffic from these devices largely originates from the
use of video and it is becoming increasingly common to view
video content via mobile devices. This is complemented by
over-the-top (OTT) messaging and voice applications, which
also make up part of data usage preferences among consumers.
15,861,048
15,000,000
10,808,947
10,000,000
6,999,095
4,351,713
5,000,000
2,592,633
At international level, video now comprises 42.7% of mobile
traffic, a 73.7% increase with respect to the 2013 figure, according to the Ericsson Mobility Report for the third quarter
of 2014 (November). This share is projected to increase to
45% in 2015, growth of 62% with respect to 2014.
1,487,756
0
2013
2014
2015
2016
Non-smartphones
Laptop
Smartphones
Tablet
M2M
Other Mobile devices
65
2017
2018
The significant increase in the volume of data used for mobile video has been driven by the popularity of streaming
video over mobile networks, more content in video format
and continuous quality improvements, both as a result of
more sophisticated devices (screen size and resolution) and
advances in mobile networks.
The definition of coverage has also changed and is no longer measured in terms of the presence of a signal (although
this continues to be an important factor), but increasingly in
terms of whether it is sufficient for the use of applications
(apps) by measuring how well a given application works on
individual networks.
In addition to driving data use, this trend is changing the way
people watch television, and consequently how the industry
designs the services it offers customers.
Mobile television
The range of video and multimedia content available over
fixed network connections and consumer preferences have
created a demand for the same services on mobile devices. This has acted as an incentive for operators to provide
users with the ability to access to content from any type of
device, a strategy referred to as TV Everywhere. Television
is also becoming increasingly interactive, driving growth in
on-demand services, digital video recording and integration
with social networks.
Product restructuring
New trends among users to communicate using data have
been a major factor in the decline of voice services among
user preferences. Throughout the world, growing demand
for data services has led operators to rethink the way they
offer services to customers, changing the structure of plans
to meet these new requirements. Operators are beginning to
focus more on the volume of data consumed instead of voice minutes, offering plans with a limited data allowance and
unlimited messaging and voice minutes. Shared plans are
also beginning to emerge, allowing a single data allowance
to be used on multiple devices, reflecting the trend for multiple connected devices.
In this context, to deliver the best experience, in 2013 Entel
began an innovative process to redesign the pricing structure of its multimedia plans and in 2014 the company has
continued to make progress in this transformation. As a reAnnual Report 2014 - For Translation Purposes Only
66
sult, at the end of December, 50% of users now had plans
that charge for excess data usage.
These new trends among consumers mean that the main
challenge is now applying this new pricing structure to the
prepaid mobile market and offering attractive mobile broadband packages.
The connectivity of things
The connectivity of things has played a major role in the
Enterprise and Corporate segments for a number of years,
however the advent of wearable devices, which have attracted growing interest in recent years, means it is also becoming a reality for consumers. Wearable devices take on
many forms, from intelligent watches, glasses, health and
sports monitors, all the way through to smart clothes.
Despite still being in the early stages of development, Cisco
highlights the high potential for growth in these devices, forecasting annual average growth of 52% up to 2018.
Billions of M2M connections
2.5
2.0 B
2.0
1.6 B
51%
1.5
1.1 B
1.0
0.8 B
0.5 B
0.5
0.0
47%
41%
0.3 B
28%
34%
71%
64%
56%
2013
2014
2015
50%
35%
48%
41%
14%
9%
2016
2017
3G
2018
2G
4G
WORLDWIDE CONNECTIONS FROM WEARABLE DEVICES (million)
the past and delivering significant improvements in operational efficiency.
200
177
180
160
127
140
120
88
100
80
58
60
40
22
36
The Industry in Chile
20
0
2013
2014
Entel is well placed to take advantage of this trend, with the
infrastructure required to support not only the connectivity of devices but also the cloud and big data environments
that make it possible to process the data that is generated
and develop innovative business models to position the business in a high-potential market.
2015
2016
2017
2018
In terms of SMEs and homes, significant growth in the use of
cloud IT services, video applications and social and business
networks is expected over the coming years. To tackle the
significant increase in the demand for services, it will be necessary to increase the capacity, security and availability of
connectivity services. Fiber optic remains one of the best technologies to address these new connectivity requirements,
in addition to supporting latest-generation mobile technologies using femptocells. The end goal is to be able to satisfy
the convergence of services and applications for businesses
and consumers over both fixed and mobile networks.
The Internet of Things is also increasingly becoming a reality due to a combination of a new way of life ushered in
by social networking and the growing number of connected
devices and sensors (e.g. cars, utilities, lights, security). This
is producing large quantities of data, much of which is stored in the cloud. The possibilities opened up by access to
this data have significant potential to help make businesses
more efficient. The unprecedented volume, speed and variety of data means companies that are able to analyze it and
extract its potential value using big data analytics will have
a major competitive advantage over their competitors.
As organizations begin to analyze this kind of information,
they will start to benefit from business intelligence, information on key decision-making variables, more accurate
business forecasting and more efficient operations.
Size
The estimated gross revenue of the telecommunications
industry in Chile was CLP 5,016,527 million at the end of
2014, with mobile communications (voice and data) making up CLP 2,643,624 million of this figure. The remainder
is split between pay television (CLP 676,952 million), fixed
Internet (CLP 437,357 million), fixed data for enterprises
(CLP 317,580 million), IT Outsourcing (CLP 393,863 million)
and fixed and IP telephone services (CLP 547,151 million).
Estimated revenue from mobile termination rates was CLP
161,128 million as of December 2014, down CLP 278,954
million with respect to 2013, which explains the slight contraction in the size of the industry.
Competition
There are five companies with their own networks present
in the Chilean mobile market, providing a full range of services, including traditional voice, mobile Internet, mobile broadband, dongle and router connections for PCs and laptops,
and machine to machine services: Entel, Movistar (part of
Telefónica España), Claro (owned by América Móvil), Nextel
(a subsidiary of NII Holding Group, acquired by Novator, a
UK-based private equity fund in January 2015) and VTR (owned by Liberty Global Media).
There are also four mobile virtual network operators
(MVNOs) that provide services over third-party network infrastructure: Virgin Mobile, Netline, GTD mobile (launched
in 2012) and Móvil Falabella, which began operation in July
2013 using network infrastructure provided by Entel. Nextel
and VTR also operate as MVNOs in areas where their own
networks do not have coverage, with Nextel using Entel for
roaming in these areas.
These concepts are already visible in industrial contexts,
where the Internet of Things and big data analytics have
been behind the rapid evolution toward predictive maintenance, consigning corrective and preventive maintenance to
67
All operators in the mobile market offer mobile Internet via
smartphones (mobile browsing), mobile broadband (USB)
and business applications.
At present, there are currently ten operators that provide
fixed telephone services covering all fixed lines in service.
The main competitors are Movistar (Telefónica Chile), VTR
and the GTD Group (primarily through GTD Manquehue and
Telsur).
Chile’s fixed broadband market has nine operators, including Entel, Telefónica Chile, VTR, the GTD Group and Claro.
TELECOMMUNICATIONS INDUSTRY REVENUE IN CHILE
By business area (December 2014)
15%
FIXED
INTERNET
31%
MOBILE
TELEPHONY
10%
FIXED TELEPHONY
AND VOIP
7%
In terms of pay TV, the main operators in the market are
VTR, Direct TV, Telefónica, Claro and Entel, which began offering the product to the residential sector in 2012.
IT
OUTSOURCING
13%
The business fixed data segment has three main operators
with a significant share of the market and infrastructure
providing national coverage. Entel’s main competitors in
this market are the Telefónica Group, Claro Chile and the
GTD Group (Teleductos and Telesur).
Finally, in the IT outsourcing market, Entel’s main competitors are split between the telecommunications industry (Telefónica, Claro and Entel) and the IT services sector (Sonda,
IBM, HP, Synapsis, Adexus and Level 3).
Outlook for growth and penetration
The industry contracted by 2.5% in 2014, mainly as a result
of the lower mobile termination rate, a more mature market and the economic slowdown during the year. The mobile termination rate was reduced by 75% in January 2014,
with the effects mainly felt by prepaid customers. This reduction, together with the general outlook for the industry,
resulted in a reduction in the penetration of mobile phones
(connections as a proportion of the population), which fell to
128.63% in September 2014, 4.2 percentage points below
the figure of 132.82% in September 2013.
However, the mobile industry benefited from the increased
use of mobile data. The proportion of smartphones with
respect to the total number of mobile lines increased to
44%, according to data from OVUM for 2014, and the co-
68
PAY TV
24%
MOBILE
DATA
Source: Entel estimates based on quarterly financial reporting, and forecasts
by IDC and Informa
rresponding figure for Entel was 60%. The increased use of
smartphones has driven growth in the use of mobile Internet connections over 3G and 4G networks, a process that
was intensified by the award of spectrum on the 2,600 MHz
band in 2012 and the tender process for spectrum on the
700 MHz band in early 2014.
Chile had 10,420,538 mobile Internet connections in September 2014, an increase of 11.8% with respect to the previous year, largely driven by mobile browsing. Of this total,
smartphones represent 91%, mobile broadband 7% and
M2M 1%.
In Chile, fixed residential telephone services have fallen
from 20.9 lines per 100 inhabitants in December 2009 to
18.9 lines per 100 inhabitants as of December 31, 2014.
However, a 73% reduction in the mobile termination rate
and the withdrawal of the national long-distance category
have helped reverse the decline in fixed telephone services.
Entel has seen growth of 101.5% for fixed telephone services with respect to 2009, with a total of 335,311 lines as of
September 2014.
INDUSTRY REVENUE
CLP billion
GDP COMMUNICATIONS INDUSTRY IN CHILE %
2.5
8,000
2.0
7,000
6,000
5,000
4,793
5,147
5,017
1.5
4,000
3,000
1.0
2,000
1,000
0
2012
2013
0.5
2014
Source: Entel estimates based on financial reporting, and forecasts by IDC
1997
1999
2001
2003
2005
2007
2009
2011
2013
Outsourcing TI
Source: Central Bank of Chile.
and Informa.
Access to fixed broadband reached a penetration of 13.91%
as of September 31, 2014, a 47% increase in the number of
customers from the respective figure of 9.96% in December
2009.
GROWTH OF IT OUTSOURCING IN CHILE
CLP million
763,232
800,000
700,000
Similarly, the penetration of pay TV subscribers with respect
to the number of households was 15.5% in September 2014,
an increase of 35% with respect to 9.8% in December 2009.
This makes growth in penetration 59% for the period.
600,000
555,275
477,712
500,000
420,275
381,403
400,000
300,000
Entel’s market share of IT outsourcing has risen from 26%
in 2012 to 28% in 2014, as calculated based on the total revenue for the Telecommunications and IT Outsourcing market using the company’s estimates from information published by the companies operating in the industry.
651,350
344,752
288,682
200,000
100,000
0
2011
2012
2013
2014
2015
2016
2017
2018
Application Management
IS Outsourcing
Hosted Application Management
Network and Desktop Outsourcing Services
Hosting Infrastructure Services
Source: IDC, IT Services Tracker, 1H 2014.
The 2014 figure is projected according to IDC.
69
03
Our Business
Regulatory Framework
Chile
Telecommunications services in Chile are governed by the
General Telecommunications Act (No. 18,168) and its supporting regulations. The act establishes a regime based on
the general principle of free and fair access to telecommunications, under which there are no restrictions on the application for concessions and permissions under the terms
and conditions established by law.
Public and intermediary telecommunications services that
require spectrum and which for purely technical reasons
only permit the participation of a limited number of companies, are subject to public tender processes under the terms
set out in the specific technical regulations.
The interconnection of public and intermediate telecommunications services is mandatory and the interconnection
prices are regulated. All other prices or tariffs are freely established by the respective service provider, although the
Tribunal for the Defense of Free Competition can intervene
when market conditions are insufficient to guarantee a free
pricing regime. Only under these circumstances can tariffs
be fixed for services and this is done in line with the terms
and procedures set out in Title V of the act, using a regulated
procedure based on prospective economic models of longterm expansion costs.
Entel holds a number of different concessions, licenses and
permits to provide its various telecommunications services.
These include concessions for mobile and fixed services,
intermediary telecommunications services (including its
concession for long-distance services) and a license for a
restricted satellite television service. Where applicable, the
authorities assign the use of radio frequencies (spectrum)
for these concessions. However, the respective concessionaire is responsible for the regulatory procedures required
to operate these concessions and must request permits for
the telecommunications infrastructure it uses in line with
current legislation.
70
Authorities
The Department of Telecommunications is the authority
responsible for the application and oversight of the General Telecommunications Act and its regulations. It is also
has sole responsibility for the technical interpretation of
the legal and regulatory provisions governing telecommunications. Its aims to coordinate, promote, strengthen and
develop telecommunications in Chile, most notably through
the use of public tender processes for concessions for spectrum when availability is limited.
The responsibility for drafting the respective tariff decrees
falls jointly to the Ministry of the Economy, Development and
Reconstruction, and the Ministry of Transport and Telecommunications.
The National Economic Prosecutor and the Tribunal for the
Defense of Free Competition are also involved in the sector,
the latter having responsibility for promoting and safeguarding free competition in markets, preventing, correcting
and prohibiting any acts or conventions that might impede, restrict or hinder free competition and sanctioning the
offending parties either individually or collectively. Examples of its role in the telecommunications industry include
identifying monopoly situations that require prices to be set
for legally mandated services, issuing rulings on company
mergers in the sector and preventing or sanctioning behavior that harms free competition.
Finally, in terms of the authorities that govern the sector, a
bill to create the Telecommunications Superintendency was
being debated at the end of 2014. This new body will primarily be responsible for enforcement in the sector, a role that
currently falls to the Department of Telecommunications.
4G Tender
In March 2013, the decree awarding the concession of frequency block B of the 2,600 MHz band (LTE or 4G) to Will
S.A., an Entel Group concessionaire, was published. From
this date, the company had one year to complete the protect
to which it committed as part of the award. The company
finalized the process for the acceptance of the works and
received authorization to launch the service for this concession in March 2014. The March 2015 deadline for the implementation of the project in mandatory locations as part of
additional obligations was two years from publication of the
decree awarding the concession in the Official State Gazette, and the company is working to meet this deadline.
The award of this frequency block is highly significant to the
company’s development, as it will make it possible to provide higher connection speeds using 4G technology.
To complement the 2,600 MHz band, the public tender process for the award of public service concessions for the
transmission of data on the 700 MHz band took place in October 2013. This frequency will allow operators to improve
their range of LTE or 4G services using spectrum that provides greater indoor penetration and rural coverage.
Bids were submitted for the three available frequency
blocks by Movistar, Claro and Entel (via its subsidiary Will
S.A.) and the tender for the three blocks in the tender ended
in a tie. Entel’s Will S.A. subsidiary was assigned frequency
block B on the 700 MHz band, which is the block with the
largest amount of spectrum (30 MHz compared to 20 MHz
for the other blocks).
Once the blocks had been assigned, the administrative
procedures began to award the respective concessions.
However at this stage, appeals and challenges were lodged
against the resolution with the Ministry of Transport and Telecommunications, which were rejected by the Ministry and
the Court of Appeal.
Following the rejection of these challenges, the supreme
decree awarding the concession is expected to be published
in the first half of 2015, making it possible to roll out the
high-speed data transmission network (LTE) on a low frequency spectrum (700 MHz) in the time scales fixed in the
respective public tender.
This means that the deadline for the concessionaires to
complete the projects will be two years from publication of
the decree, while the deadline to meet requirements to provide service in isolated areas and roads, and Internet access
services will be 18 months from publication of the decree.
Tariff Processes
At the end of 2014, the tariff processes were finalized for
Entel PCS Telecomunicaciones and the other mobile companies operating in Chile to set the mobile termination rate
the period 2014–19.
Following the corresponding administrative proceedings,
the termination rate was set at CLP 14.9 per minute for the
first year, falling to CLP 8.6 in the final two years, a reduction
of approximately 74% for the first year and over 85% for the
final years of the five-year period.
In this context, administrative proceedings took place in
2014 to determine the tariffs for the main local telephone
concessionaires for the next five-year period. Tariffs are
likely to fall, although in some cases there are still opportunities for administrative review.
The tariff proposal by the Department of Telecommunications for Telefónica Chile S.A. is based on a decree that will
gradually reduce the access charge, starting with a 36% reduction in the first year and finishing the five-year period
with a reduction of 53%. The reduction for the fixed to mobile origination tariffs will be between 64% and 68.5%. All
these tariffs will be retrospectively applied from May 2014.
Tariff processes are still underway for the concessionaires
VTR Banda Ancha (Chile), Telefónica del Sur S.A. and Compañía de Teléfonos de Coyhaique S.A. The proceedings are
due to be finalized in 2015, with the regulatory authorities
proposing a significant reduction in access charges and local connections.
Regulatory Changes
Following the implementation of legislation in 2012 to reduce the number of primary zones for fixed telephone services
from 24 to 13 during the first half of 2014, Act No. 20,704
established a single tariff zone for local telephone services.
The withdrawal of the national long-distance category was
completed with implementation of the initiative in the Metropolitan Region in August 2014. In practice, this means
there will be a single tariff zone for local communications
from this date.
71
In terms of the implementation of number portability, which
began in December 2011, in the third quarter of 2014, work
began to implement portability of numbers for complementary services, which took place on the third weekend of
October. Similarly, the Department of Telecommunications
issued a communication stating that the geographic portability of local lines is due to be implemented in August 2015
with full portability, allowing the use of the same numbers
on fixed and mobile networks, scheduled for implementation in February 2016.
The processing of the Digital Television Bill, designed to
allow the introduction of terrestrial digital television and the
transition to the switch-off of analogue TV, was also completed in 2014. The bill will give powers and responsibilities
to the National Television Council, establishes a new licensing model for concessions and the procedure for awarding
them, defines the types of television service operators (national, regional, local and community) and specifies the penalties applicable for failure to comply with the regulations.
The new law will also establish a series of regulations that
must be acted as part of the application of the legal provision.
At the end of 2012, the Tribunal for the Defense of Free Competition ruled on the case filed in December 2010 regarding
the establishment of a general instruction on the effects on
free competition of the presence of different on-net and offnet prices for public telephone services and bundled packages of telecommunications services.
In the case of the former, it established two adjustment
periods: one in which on-net and off-net pricing structures
could be maintained, and another, taking effect from the
new mobile tariff decrees in January 2014, in which the pricing structure is no longer permitted for the sale of new
plans. It also included provisions for existing customers to
retain their plans if they wished to do so.
When the new tariff decrees took effect in January 2014,
General Instruction No. 2 issued by the Tribunal for the Defense of Free Competition prohibited all mobile telephone
services offered by concessionaires from differentiating
between on-net and off-net minutes. This means that from
this date, all services offered by companies must be have a
flat-rate tariff with the same prices for all destinations.
With respect to this General Instruction, in December 2013,
the Supreme Court ratified the majority of the ruling and
corrected the instruction to prohibit the provision of more
72
favorable bundled telecommunications services products
for fixed and mobile services on a permanent basis, not only
until operation of the 2,600 MHz band.
In 2014, the Tribunal for the Defense of Free Competition
also recommended the creation of new instructions as part
of the legislation for the sector, to be drawn up by the Ministry of Housing and Urban Development and the Department
of Telecommunications as the result of undefended proceedings by the National Economic Prosecutor to improve
the current framework to allow more companies to provide
telecommunications services in large buildings and condominiums.
In terms of radio spectrum, the National Economic Prosecutor is also reviewing the conditions for the use of radio
spectrum in the telecommunications market to study the
feasibility of establishing a secondary market for this scarce commodity that is essential for providing telecommunications services to promote development through greater
flexibility in the use of spectrum.
Finally, the new Telecommunications Services Regulation
took effect in June. In addition to establishing a new regulatory framework for telecommunications in Chile, it also
updates the sector regulations, extending existing obligations for telephone services to Internet access and pay TV
services. The new regulatory body also covers new services
provided over networks, such as roaming and value-added
services, establishing conditions for contracting, enabling
and disabling the services. It also makes changes to payment documents and requires users to be provided with
more information.
Legislation in progress
At the end of 2014, the following initiatives were in progress
in the areas in which Entel operates:
The Telecommunications Superintendency Bill – This bill
aims to establish a new enforcement body to ensure compliance with regulations and apply penalties if required.
The bill seeks to separate the body responsible for creating
regulations and the body responsible for their application.
Under the proposed structure, the Department of Telecommunications will be responsible for the general and abstract
administrative interpretation of sector regulations (the body
has responsibility for public policy objectives in the sector)
and the new Telecommunications Superintendency will be
responsible for ensuring they are correctly applied.
Bill Establishing the Requirement to Guarantee Minimum
Internet Access Speeds Meets Product Descriptions – This
bill seeks to establish requirements for Internet access providers to guarantee the speed they offer when marketing
their products. The bill will fix percentages that must be
guaranteed by service providers for national and international connections, making a distinction between access provided over fixed and mobile connections.
The Consumer Rights Act – During the third quarter of
2014, debate began on a bill to reformulate the Consumer
Rights Act and the National Consumer Watchdog (Sernac)
to reinforce the body’s activities and provide it with new
powers.
Other initiatives – There are currently various legislative
proposals with the potential to impact the telecommunications industry. The most significant include an amendment
tabled to Act No. 20,599, regulating the installation of transmission and receiver antennas for telecommunications services, a bill to regulate calls to emergency services to prevent misuse, and a bill to ensure the registration of prepaid
customers. All these initiatives are still in the early stages
of debate; however they are expected to make progress in
2015 and will either become part of the regulations governing the sector or be rejected in debates by the Chilean congress.
latory burden for the industry, insofar as they will establish
a new method of enforcement and a new regulatory framework that will require adjustments to current processes
to ensure compliance with these requirements.
Similarly, the instructions issued by the Tribunal for the Defense of Free Competition, the new values established for
access charges for mobile companies and the implementation of the Telecommunications Services Regulation create
a new context for the industry as they have required modifications to the pricing structure for public telecommunications services to comply with the instructions.
Despite the fact these regulatory changes require Entel to
adapt its processes, they also present new business opportunities. The company’s diversity and relative size shield it
from the effects of adverse regulation, reducing the risks to
its operations, cash flows, creation of shareholder wealth
and contribution to the community.
Other modifications being studied
At the end of the year, the Department of Telecommunications was studying a number of new regulations for the
sector, including legislation to regulate relationships and
obligations for virtual mobile network operators and a new
service quality regulation based on a technical network management plan.
The process is also underway to establish tariffs for the
concessionaires VTR Banda Ancha (Chile) S.A., Telefónica
del Sur S.A., Telefónica Chile S.A., Complejo Manufacturero
de Equipos Telefónicos S.A.C.I., and the tariff process for the
concessionaire Servicio Público Telefónico, Comunicación y
Telefonía Rural S.A., which began in 2013, was finalized.
Impact of changes
In addition to changing the competitive structure of the industry and generating new opportunities, both the bills that
are currently being debated and regulatory initiatives by the
Department of Telecommunications, create a heavier regu73
03
Our Business
Market Segments
Entel aspires to lead the segments in which it operates
and develop a world-class range
of products for each segment, products that are distinctive, attractive, competitive and
transparent.
REVENUE BY SERVICE (CHILE)
9%
FIXED ENTERPRISE
AND CORPORATE*
2%
ENTEL HOGAR AND
OTHER RESIDENTIAL**
80%
5%
MOBILE CHILE
LONG-DISTANCE
AND TELEPHONY
4%
WHOLESALE***
* Integrated services (voice, data and Internet) for the Enterprise and Corporate segments.
*** Network leasing and traffic business.
REVENUE BY SEGMENT (Chile)
20%
ENTERPRISE
14%
61%
CORPORATE
CONSUMER
5%
WHOLESALE
CONSUMER
ENTERPRISE
CORPORATE
WHOLESALE
Customers
Customers
Customers
Customers
The Consumer Division provides
voice and data services to 8,664,587
mobile customers and
its Entel Home products provide
wireless fixed telephone, broadband
and television services.
The Enterprise Division provides
services to around 108,700
businesses of different sizes
in various sectors, from micro
enterprises all the way through to
large companies.
The Corporate Division provides
services to around 600
conglomerates with operations in
Chile with specific requirements for
individual solutions using specialized
technology and services that are
key to supporting the strategic
processes of their operations.
The Wholesale Division provides
network infrastructure and
services to over 46 national
telecommunications operators,
including Claro, Movistar, VTR,
Nextel Telefónica del Sur and GTD,
in addition to 95 international
operators, including AT&T, Vodafone,
Sprint, BT and TATA.
Solutions
Solutions
Solutions
Solutions
Mobile telephone services
(with or without mobile
Internet)
Mobile solutions
Mobile services
Smartphone business plans
(multimedia)
Mobile broadband
Roaming
Mobile telephone services
» Voice plans; online
management systems.
» Mobile Internet
» BlackBerry services
Entel GPS
Mobile broadband
Mobile Intranet
M2M data plans
Mobile business solution applications
Roaming
International roaming
Contract and prepaid
Mobile broadband (for
netbooks, laptops and tablets)
Contract and prepaid
Residential
Fixed telephone services
Wireless fixed broadband
Television
Long-distance carrier
Fixed and mobile
Fixed solutions
Business Pack
NGN
Trunk IP
Dedicated Internet
MPLS data
Phone lines
Digital streams
Long-distance international
Information technology
Mobile device management (MDM)
Office 365
ProntoForms
GPS
M2M
Virtual dedicated server
Housing
Hosting
FacturaNet
ComercioNet
Fixed solutions
Data networks
Corporate Internet
Data center interconnection
Private phone services (IP) and
collaboration
Audiovisual and video
communication solutions
Local and international telephone
services
Private voice network
Centrex
600 and 800 numbers
Information Technology
Application solutions
End-user solutions
Engineering equipment and services
Integrated service outsourcing
SAP outsourcing
Entel’s international roaming
business has over 465 agreements
in place with mobile operators
throughout the world to provide
reciprocal access to domestic
networks, allowing customers to
continue using voice, data and
messaging services as if they were
on their own network.
MVNO and national roaming
MVNO services provide network,
infrastructure and other mobile
services that allow virtual mobile
operators to enter and operate in the
Chilean mobile industry.
National roaming services allow
mobile operators with their own
infrastructure to lease mobile
network services from Entel in
areas where they have no or limited
coverage.
Data networks
Long-distance international
traffic services
Data center and on-demand
services
IT equipment housing/hosting
IT platform and telecommunications
management services
Cloud computing services, including
on-demand IT infrastructure,
storage, backup and on-demand
security
Cloud telecommunications services:
private and on-demand, IP telephone
and video conference services
75
03
Our Business
Consumer Segment
Entel successfully secures the preference of customers in
the dynamic world of mobile
data and is promoting its Entel Hogar services, which provide innovative fixed solutions
that aim to meet the growing communications needs of a continuously changing world.
Context
»» Over 275,000 revenue generating units for Entel Hogar at the end
of 2014.
»» Launch of new fixed telephone products (AutoPack).
»» Progressive transformation of mobile pricing structures from voice
to controlled data.
»» 72% of users in the Consumer Segment have data plans or packs.
»» Launch of unlimited voice plans.
»» Transformation of stores to improve the customer experience.
»» Leadership in portability among high-value customers.
The accelerated growth in the Chilean telecommunications
industry came to an end in 2014. After increasing from
100.2% in 2010 to 134.2% at the end of 2013, penetration
of mobile phones fell to 128.6% in 2014, according to the
Department of Telecommunications Quality Ranking in January 2015.
This contraction reflects the fact that the industry has matured and occurs against the backdrop of a less dynamic
economy. This was the context of the reduction in the mobile
termination rates established by the authorities in January
as part of the five-year process to set tariffs took effect. The
size and abrupt nature of the change also slowed performance in the Consumer Segment, particularly among prepaid users.
All this meant 2014 was a year of changes, particularly for
mass-market prepaid mobile services.
In contrast, despite also being affected by the reduction in
mobile termination rates, the postpaid segment was able to
partially offset this by growth in revenue from mobile Internet associated with the increased use of mobile data as a
result of the higher penetration of smartphones.
New business model for prepaid mobile
As part of efforts to address the dramatic reduction in the
mobile termination rate, which were cut to one sixth of their
76
MOBILE SERVICES
Number of users and penetration per 100 inhabitants.
120.6%
115.6% 117.9%
123.9%
132.0%
128.8% 130.1% 128.2%
137.0% 136.4% 138.1%
132.8% 134.2% 134.4% 131.9% 128.6%
106.9%
12,259
12,455
12,930
14,066
14,333
14,617
15,114
15,886
16,122
15,704
16,390
17,283
17,181
17,463
16,437
16,630
16,704
16,031
15,452
4,820
5,106
5,380
5,786
5,958
6,182
6,308
6,430
6,470
6,615
6,635
6,658
6,707
6,788
6,933
7,031
7,044
7,335
7,530
102.7%
11,933
100.2%
4,517
96.7%
IV
I
II
III
IV
I
II
III
IV
I
II
III
IV
I
II
III
IV
I
II
III
2009
2010
Postpaid customers
Prepaid customers
2011
2012
2013
2014
Penetration per 100 inhabitants
Source: Department of Telecommunications Quality Ranking, January 2015.
previous value under the new pricing structure established at the start of 2014, subsidies were reduced for mobile handsets in the prepaid segment. This change meant
that growth in the customer base was lower than in previous years since consumers have decided not to renew
their handsets, which has had a knock-on effect of fewer
used handsets entering the secondary market. Similarly, the
business can no longer rely on a growing customer base
but must instead focus on increasing revenue from existing
customers, implying a change in the model that has been
used until now.
This shift has involved the establishment of initiatives such
as prepaid plans with incentives to top up, offering benefits
such as discounts on handsets, exclusive packs of minutes
and data, the option to borrow credit, all based on the cumulative value of the customer’s top-ups over the previous
six months.
Consumer mobile leadership
Entel had 8.7 million mobile users at the end of 2014. Against the backdrop described above, Entel maintained its leadership of postpaid voice and mobile broadband in the Con-
sumer Segment, making it the largest company, closing the
year with a market share of 39.8% and 65.1%, respectively.
In response to aggressive sales strategies by its competitors, especially among high-value customers, the company made a considerable investment in postpaid services,
particularly in handset subsidies. At the end of the year,
smartphone penetration stood at 82% for postpaid customers and 50.4% for prepaid customers.
For the Consumer Segment as a whole, including both prepaid and postpaid mobile customers, the company has a
36.2% share of the voice market, slightly down from 37.5%
in 2013, largely as a result of changes in the prepaid segment.
In terms of portability, Entel had the highest balance of
transfers for contract customers in all market segments
over the last year, according to information provided by the
Department of Telecommunications, attracting a total of
36% of all transfers, equivalent to 254,036 new users. Between January 2012 and December 31, 2014, the company
attracted 40% of contract users, making a total of 547,019.
77
Leadership in customer satisfaction
In a highly competitive market, not only did the company
maintain a stable market share but the twelfth year in a row,
Entel came first in the mobile category of the National Customer Satisfaction Award by ProCalidad. This is the only
ranking that analyzes the satisfaction of Chilean consumers
in 25 service sectors based on over 30,000 direct surveys
every year.
Similarly, according to the network quality indicator for mobile voice services, 99.3% of calls were successfully made
with respect to the total number of attempts, the highest
among the companies measured and consistent with Entel’s
commitment to helping customers live better connected.
This latter indicator is measured using Drive Test measurements for four areas in the Metropolitan Region (La Florida,
Maipú, Pudahuel and Puente Alto). The tests are performed
simultaneously and are carried out outdoors under equal
conditions for operators with their own networks (2G and
3G), with an average of 400 measurements per operator.
Entel was also awarded Best Customer Experience for telecommunications in Chile for the third time. The award is
made based on the results of the Best Customer Experience study (BCX) by the consultancy firm IZO from sample of
more than 13,000 opinions from consumers on 130 companies in various sectors in Brazil, Chile, Colombia, Spain,
Mexico and Venezuela.
Pricing innovations
In addition to these awards, a study by the Department of
Telecommunications in 2014 found that Entel was the company for which fewest complaints were made to the department as a proportion of the number of mobile users (0.7
per 10,000 users), compared to other companies with their
own telecommunications networks in Chile.
Changing trends in the market have led the business to focus on the transmission of data and as a result, voice has
become less important. To guarantee the best possible experience on all devices and ensure its business model is
aligned with this shift, Entel began to modify the pricing
structure of its multimedia plans in 2013. The company has
78
In terms of customer satisfaction, the user satisfaction indicator measured in the study by the Department of Telecommunications ranked Entel first for the second half of 2014,
with a score of 51.6, reaffirming the company’s leadership
in terms of service with respect to other operators in Chile.
successfully continued to make process in the transformation of its pricing structure over the last year, with 49% of
postpaid customers now using tariffs based on data usage.
This process was complemented by a new line of plans for
postpaid customers, with the introduction of the concept of
unlimited voice plans at the end of 2014.
Entel launched two plans as part of this strategy. The first,
the Simple Multimedia plan, was launched in August and targets customers who do not need a handset, providing a data
allowance with the possibility to pay for excess traffic or purchase packs for additional data. The second, the Full Multimedia plan, was launched in November and provides unlimited
calls to all mobile networks and fixed telephone numbers in
Chile for 300 different numbers with controlled data.
creasing the total number from 147 in December 2012 to
197 stores by the end of 2014.
This is complemented by telephone service channels, in
which Entel achieved high levels of service and significant
improvements in customer satisfaction for both self-service
and staffed platforms, the latter being the preferred channel
for post-sales service.
As part of the company’s overall strategy to deliver the best
possible experience via its communications channels, the
online channel is becoming increasingly important in providing the best customer experience in all the markets and
segments in which Entel operates.
Residential products
The challenge in this area is to consolidate the presence of
this structure among a larger proportion of the user base
and apply a similar structure for prepaid customers, in addition to developing attractive new pricing structures for mobile broadband.
In January 2014, Entel also changed its full range of anydestination plans, which offer the same tariff for calls to
numbers on the same mobile network and other networks,
following of the ruling by the Tribunal for the Defense of
Free Competition, permanently prohibiting the sale of plans
based on different prices for on-net and off-net calls.
New service model
The large-scale adoption of smartphones has resulted in
more complex inquires and requests from customers using
our service channels. To address this change, Entel began a
three-year process to transform its stores in 2013. The aim
is to transform stores into spaces where customers can try
products and receive service from experts who can provide
comprehensive advice throughout the full service cycle. The
company transformed 39 stores under this new concept during the last year.
With the launch of Autopack at the end of 2014, Entel showed
it is possible to continue making innovations in wireless fixed telephone services. The self-installing kit, which can be
purchased through various outlets and provides customers
with access to the service without having to wait for an installation, complements the company’s range of products for
residential customers.
With its value backed by its distinctive technology and a
robust mobile network, Entel has achieved growth in fixed
telephone services at a time when the industry as a whole
is in decline. Launched in August 2012, this new product,
which includes wireless fixed telephone and broadband services, together with satellite TV, had attracted over 275,000
revenue generating units by the end of 2014.
Entel Home has focused on areas with low coverage for fixed services and aims to provide home access to connectivity and entertainment, improving the customer experience
and making the company’s services available to everyone.
In this market, the main focus has been on developing the
model of risk, establishing control procedures, operating
models and commissions.
As part of this project to redesign the customer experience,
in 2013 the company also began to standardize the format
of its stores to include post-sales services at over one hundred. This has allowed the company to increase post-sales
coverage, offering new transactions at all its stores and in-
79
Revenue
Total revenue for the Consumer Segment in 2014 was
CLP 895,082 million, down 10% from the previous year, as a
result of the market context described in this section.
The use of data continued to grow, especially in the postpaid
segment, and as of December 31, 2014, 72% of the postpaid
customer base had data or multimedia plans, compared to
a penetration of 58% in 2013.
The strategy to deliver continuous innovation in fix telephony services is largely responsible for the increase in the
use of the Entel Hogar services, which grew by 101% to reach CLP 31,549 million in 2014.
CONSUMER SEGMENT – SHARE OF GROSS REVENUE OF ENTEL
CHILE (2014)
CONSUMER SEGMENT – SHARE OF TOTAL SERVICES OF ENTEL
CHILE (2014)
MOBILE
SERVICES
73%
FIXED
SERVICES
18%
48%
OTHER
SEGMENTS
0
52%
-10%
900,000
895,082
OTHER SEGMENTS
95%
MOBILE SERVICES
AND HANDSETS
47,390
850,000
847,692
800,000
750,000
100
FIXED
SERVICES
35,414
962,205
80
5%
997,619
950,000
60
CONSUMER SEGMENT – REVENUE BY SERVICE
1,050,000
1,000,000
40
CONSUMER SEGMENT
CONSUMER
SEGMENT
CONSUMER SEGMENT – REVENUE (CLP MILLION)
20
2013
FIXED SERVICES
2014
MOBILE SERVICES
80
81
03
Our Business
Enterprise Segment
Entel is continuously focused on providing quality service, developing integrated products to
increase its market share among micro and SME customers, complemented by its proven
value proposition for Chile’s large companies.
»» Double-digit revenue growth from large-scale fixed services,
associated with micro enterprises and SMEs.
»» Launch of new multimedia plans for SMEs with unlimited voice,
increasing mobile Internet penetration to 56%.
»» Launch of a mobile device management (MDM) service.
»» Upgrade of GPS services, focusing on the SME segment.
In terms of IT services, the range of infrastructure services
at industry level became more dynamic, with cloud productivity services marked by the launch of Office 365 by
the company’s competitors as they also began to offer this
service.
The year also saw the launch of Entel’s mobile device management solution in August, making the company the first
operator in Chile to offer this world-class solution, provided
by AirWatch, an international leader in mobility management services.
Value Proposition
Context
In 2014, Entel continued to lead the mobile industry in this
segment in terms of market share, transforming pricing
structures for mobile Internet toward a model based on
charging for excess data usage (limited data plans), moving
away from the model used by its competitors where unlimited data plans are offered with speed restrictions for excess
usage.
In terms of fixed telephone services and Internet, the company focused on consolidating the expansion of fiber-optic
technology, making it available in commercial areas and
buildings, largely in response to the demand for high-speed
Internet among smaller businesses.
82
Entel leads the Enterprise Segment, working closely with
its customers to provide them with services and facilitate
business opportunities. It is agile, reliable and competitive,
and adapts to enterprises of all sizes with a range of highquality, innovative, integrated and convergent services.
The company’s sales executives and technical staff are fully
aware of the importance of connectivity to its customers’
businesses and the services Entel provides are supported
by the best infrastructure on the market managed to the
highest standards, all of which are key to allowing the company to create value by providing a distinctive experience.
Among large businesses, the company has positioned itself
as a supplier of advanced services, whose design and implementation responds to the specific needs of individual customers. For SMEs, Entel offers a flexible portfolio of scalable
mobile telephone services and fixed and mobile Internet.
Customers, revenue and market share
New trends
In 2014, Entel’s customer base was 108,700, with a market
share of 36% of revenue, taking into account all business
activities.
In terms of mobile services, at the end of 2013, Entel positioned itself to lead the trend for an increased emphasis on
data and a reduction in voice services, implementing a new
pricing structure for SMEs. The new plans have larger data
allowances (now measured in gigabytes instead of megabytes) and charge for additional traffic.
In spite of fierce competition in the segment, in 2014 Entel’s
business maintained its leadership of the mobile market
with a share of 55% in the Enterprise and Corporate segments for both voice and mobile broadband.
Revenue share for fixed services grew 1.9% to a total of
20.2%, largely driven by SME customers.
In terms of the breakdown of revenue, 78% came from mobile services and 22% from fixed services (including IT), covering micro enterprises, SMEs and large businesses.
Leadership in Portability
The company’s share of the mobile portability market fell
with respect to 2013 although the figures for the Enterprise
Segment remain above 51%.
In the fixed services market, the strategy to increase the
number of micro-business customers resulted in an increase of 4,658 lines transferred, consolidating growth with respect to the previous period.
This pricing structure was consolidated in 2014, offering a
constant speed, optimal browsing quality and significantly
increased or unlimited voice, depending on the specific plan.
The competition has continued to provide unlimited data
plans, with reductions in speed once a certain allowance
has been exceeded, and offer much fewer voice minutes.
The range of mobile plans for SMEs is focused on providing
flexible multimedia plans that allow customers to combine
services based on their usage profile and obtain volume discounts. These plans, together with a major strategy to educate and provide information about data usage, represent
an innovation for the market in general.
In the fixed segment, the range of services was focused on
consolidating the penetration of standardized services (Business Pack) to provide micro-businesses with telephone
services and high-speed Internet. As part of this approach,
the company has implemented a fixed network expansion
project based on the rollout of fiber-optic networks for businesses and the continuation of the Gigabit-capable Passive
Optical Network (GPON), providing coverage to 25,034 new
businesses throughout the year. In terms of fiber optic coverage, in 2014 there were around 25,000 new businesses
83
passed with fiber optic technology, an increase of 60.5%
with respect to the end of 2013, with a presence in 14 new
districts throughout the country.
The IT business also provides tailored services to meet the
needs of smaller businesses, particularly the launch of the
GPS Lite Plan, which will provide the segment with a competitive product for monitoring small fleets.
Penetration of the market was also reinforced by Office 365,
a mail, productivity and collaboration solution, working in
partnership with Microsoft.
The year also saw the launch of Entel’s mobile device management solution in August, making the company the first
operator in Chile to offer this world-class solution, which
is provided by AirWatch, an international leader in mobility
management services. The tool makes possible the centralized and secure management of the applications available
on users’ mobile devices. Features include blocking applications that can jeopardize the security of information, such as
cameras and social networks.
Finally, to raise awareness of its IT services, Entel ran relationship events with potential customers throughout the
country’s regions for the first time, making contact with
over 100 enterprises.
Channel strategy
In 2014, to continue improving the competitiveness of channels for capturing and developing our customers, Entel
worked in partnership with a consultancy firm on a project
to provide uniform tools and a methodology for managing
workflows over the channels.
The plan aims to create a cultural change that will make
possible daily performance records for individual offices,
structured management panels with management indicators (KPIs) for monitoring the relative areas, and the monitoring of senior management tasks, providing a single measurement platform for all channels.
Customer satisfaction
In 2013, the Enterprise Segment established a road map
to radically redesign its customer experience by 2015. This
change was reflected in a survey carried out by the firm
Adimark in December 2013, with the company reaching a
net satisfaction level of 55% in the Enterprise Segment. This
84
level was maintained in the results of the 2014 survey, in
which the company scored 54%.
For large businesses, the result was 61% for mobile services and 62% for fixed services.
These achievements were the result of efforts by the company to improve customer relationship experiences through
campaigns such as Modelo VIP, which attracted the participation of 156 large enterprises. Progress was also made in
the project to redesign the experience and service for SME
customers based on the concept of the customer journey,
which it is hoped will further increase satisfaction levels.
Positioning campaigns
Changes were made to the structure of existing campaigns
to build closer relationships with micro and SME customers, and counter the perception of Entel as a large business suppler, using an approach that maintains a presence
through television commercials throughout the year instead
of periodically. This has made it possible to improve relationships with this group and increase penetration.
Results
Total revenue from the Enterprise Segment fell by 5% in
2014. This is explained by the 6% fall in revenue from the
mobile business with respect to the previous year, mainly as
a result of the reduction in the mobile termination rate, which
was partially offset by the increase in mobile data. Revenue
from fixed services fell by 1%, largely from the impact of less
revenue from termination rates and the withdrawal of the national long-distance category from August 2014.
This was partially compensated by a double-digit increase in the mass-market fixed business, complemented by
strong growth in revenue from IT services over the period.
This change is linked to the new strategy for SMEs and the
company’s attractive range of IT services.
ENTERPRISE SEGMENT – SHARE OF GROSS REVENUE OF ENTEL
CHILE (2014)
ENTERPRISE SEGMENT – SHARE OF TOTAL SERVICES OF ENTEL
CHILE (2014)
17%
ENTERPRISE
SEGMENT
83%
OTHER
SEGMENTS
MOBILE
SERVICES
20%
FIXED
SERVICES
24%
IT
SERVICES
5%
0
20
40
ENTERPRISE SEGMENT
ENTERPRISE SEGMENT – REVENUE (CLP MILLION)
350,000
310,956
63,603
-5%
100
OTHER SEGMENTS
22%
FIXED
SERVICES
2,423
300,000
80
ENTERPRISE SEGMENT – REVENUE BY SERVICE
296,489
1,984
60
62,917
250,000
200,000
245,369
231,149
2013
2014
150,000
78%
MOBILE
SERVICES AND
HANDSETS
100,000
50,000
0
IT SERVICES
FIXED SERVICES
MOBILE SERVICES
85
03
Our Business
Corporate Segment
Creating solutions that
change the way large companies do business.
»» Highest market share in telecommunications for the fixed and
mobile markets.
»» Implementation of the project to modernize communications for
Chile’s Investigative Police Force.
»» Launch of operations for the Ministry of Health in the country’s
largest ever WAN network expansion.
»» Revenue growth of 11% for fixed services and IT.
»» Data penetration (packs and plans) of total users was 60%
(including packs and plans with charges for excess usage).
There is also a trend in the market to contract services that
allow customers to mobilize applications or process flows
using smartphones and tablets, manage mobile devices,
and use video technology for distance meetings, training,
remote working and the dissemination of marketing material for the positioning and promotion of their products.
Similarly, the trend to group IT outsourcing contracts under a single supplier has continued as a result of increased
competition, following the launch of data centers by Sonda,
IBM and Claro.
In 2014, there was also high demand for Machine to Machine (M2M) solutions, designed to connect and remotely control elements through mobile network platforms.
Context
In this segment, Entel services more than 2,200 companies
and institutions throughout Chile. Its customers, which are
conglomerates, comprise around 580 corporate groups and
are large corporations whose size or complexity requires
service and solutions that go beyond those provided to consumers or smaller businesses.
In recent years, in addition to traditional requirements for
data networks, mobile solutions and IT, customers in the
Corporate Segment have shown a growing interest in using
cloud platforms, allowing them to make the switch from
the operation of their own platforms to the gradual or full
outsourcing of their telecommunications solutions.
86
The market appears to be in full growth, with ample opportunities for the development of associated products.
In this context, growth in the Corporate Segment is largely
being driven by fixed services (data networks, Internet and
telephone) and IT services (both via the cloud and in relation
to applications and mobility). In terms of mobile services,
the use of mobile data will continue to rise and, if correctly
handled, will help compensate the decline in voice services
being experienced by the industry, making mobile services
Joi Ito, Head of MIT
Media Lab, giving the
keynote presentation
at the 2014 Entel
Summit.
a key source of the development of this segment in the long
term.
Leader in fixed and mobile
segments with a market share
of 65% and 63%, respectively.
Value proposition
To help and support Chile’s large corporations in the transformation of their businesses, Entel offers innovation and
the capacity to deliver projects for their telecommunications
and IT services. For each customer, the company aims to
provide a service based on the specific requirements of the
user, with tailored technical solutions delivered by highly
trained staff with experience and knowledge of their customers’ businesses. This is made possible by Entel’s recognized excellence in infrastructure.
Major projects
In 2014, Entel began operation of the services awarded by
the Ministry of Health, involving Chile’s largest ever WAN expansion, with 1,530 points throughout the country, making
this Entel’s largest ever contract in this market. The services include fixed communications, such as a national data
network, fixed telephone services, Wi-Fi and videoconferencing, as well as mobile phone services and mobile broadband, complemented by a security platform, email and help
desk.
The provision of these services and their integrated management, will allow the Ministry of Health to standardize service standards and coordinate demand between establish-
ments in the health sector throughout the country. This will
help ensure all users of the system receive better service
with reduced timescales, thanks to the availability of medical information online.
In 2014, Entel also implemented the contract for the communications modernization project signed with Chile’s Investigative Police Force in 2013. The project provides the
institution with equipment and communication links, telephone devices, and data and voice transport, both internally
and externally. These platforms allow the components of
the institutional network to communicate with each other
and the community.
The advances will help the police force provide a modern
and efficient service that is able to respond to the continuous challenges created by criminal activity and effectively meet public safety requirements.
Mining solutions
Entel’s ability to provide tailored solutions for individual
customers is clearly shown by its services in the mining
industry, such as its mobile reporting tool, which provides
graphs that can be viewed from any location using a tablet
or smartphone, showing aspects such as details of internal operations, daily production information and emergency alarms. However, the highlight of the company’s wide
portfolio of services is big data, which makes it possible to
87
process information and provide online reports about the
status of operations, driving the automated processes currently used by the mining industry. This is complemented
by operational continuity services providing support for various on-site technology platforms, such as PCs, telephone
services and access control, 24 hours a day, 365 days a year.
Chile’s most modern data center
The launch of the second phase of the Ciudad de los Valles
data center takes the center’s total available surface area
to 4,000 m² and increases Entel’s total data center capacity
to 7,500 m².
Working to improve
satisfaction
To ensure its services provide high levels of satisfaction for
its customers, Entel continued with the implementation of
its plan to improve the customer experience based on the
concept of customer journeys. The approach aims to maximize customer satisfaction and operational efficiency by redesigning processes across the business (journeys). Customers are invited to participate in the process, which focuses
on their comments, the vision of the organization and the
analysis of world-class process benchmarking.
Market leadership
Both phase one and phase two (completed in 2013) of Ciudad de los Valles have Tier III Design Documents and Tier
III Constructed Facility certification, awarded by the Uptime
Institute to certify that the design, implementation and operation guarantee 99.982% availability in the event of contingencies. Ciudad de los Valles houses the operations of over
180 customers, managing around 2,500 servers. The total
capacity of Entel’s data centers is currently 7,500 m² of floor
space, providing services to over 300 customers and managing around 5,000 servers.
Cloud computing highlights
In response to growing demand for integrated storage and
management solutions, Entel has developed a range of products that help companies avoid investment in telecommunications infrastructure and optimize their business processes.
One such product is Video Cloud, a system that allows users
to establish in-person video conferences regardless of their
location, without the need for a specially equipped room.
Entel takes care of the administration, management and
scheduling of the service, providing customers with video
infrastructure at its data center, as well as application support and maintenance, all of which helps support the growth
of its customer’s businesses.
The Entel Enterprise Cloud service makes it possible to use
cloud resources for processing, memory, storage, connectivity and solutions to meet the requirements of different
companies.
88
The company maintained a high market share of the telecommunications market, both in fixed and mobile services,
and consolidated its position as a major participant in the IT
market with a share of 28% of outsourcing services (excluding application management), according to studies by the
firm IDC and internal estimates by Entel.
Revenue growth
Despite the regulatory effects of the significant reduction
in the mobile termination rate and the withdrawal of the
national long-distance category, the Corporate Segment
recorded a 4% increase in revenue, largely driven by the increase of fixed data networks and IT services as a result of
the growing demand for cloud computing, data centers and
IT infrastructure.
Subtracting the effects of regulatory changes, revenue
growth was 7.9% for the year, while revenue from fixed services, such as data, Internet and IT, grew by 10%.
The three areas in the Corporate Segment, fixed services,
mobile services and IT services, contributed 46%, 30% and
24% of this figure, respectively.
4%
revenue growth in the
Corporate Segment.
46%
contribution of fixed network
services to Corporate
Segment revenue.
CORPORATE SEGMENT – SHARE OF GROSS REVENUE OF ENTEL
CHILE (2014)
CORPORATE SEGMENT – SHARE OF TOTAL SERVICES OF ENTEL
CHILE (2014)
12%
CORPORATE
SEGMENT
88%
OTHER
SEGMENTS
MOBILE
SERVICES
5%
FIXED
SERVICES
37%
IT
SERVICES
95%
0
20
40
CORPORATE SEGMENT
60
80
100
OTHER SEGMENTS
CORPORATE SEGMENT – REVENUE BY SERVICE
CORPORATE SEGMENT – REVENUE (CLP MILLION)
250,000
203,572
200,000
46,527
211,284
4%
30%
51,017
150,000
88,194
96,848
68,851
63,419
2013
2014
MOBILE
SERVICES AND
HANDSETS
100,000
50,000
70%
0
IT SERVICES
FIXED SERVICES
FIXED
SERVICES
MOBILE SERVICES
INGRESOS MERCADO CORPORACIONES EN $ MILLONES
89
03
Our Business
Wholesale Segment
efficient, high-quality integrated solutions h
ave
allowed Entel to maintain its position as a
competitive and reliable supplier for other national and international telecommunications
operators and mobile virtual network operators.
Context
»» Significant reduction in international roaming costs for data.
»» Growth in MVNOs accompanied by high-quality infrastructure and
more robust platforms.
»» Finalization of the Enhanced Telecommunication Operations Map
(eTOM) certification process.
In 2014, telecommunications companies continued trying to
maximize the use of their own infrastructure. In this respect,
Entel’s reputation and the efficiency of its platforms allowed
the company to compete in the wholesale business, where
commercial processes and service continuity are key.
The company has continued working to diversify its customer portfolio in a year marked by the consolidated presence of mobile virtual network operators, whose products are
based on flexible services and the knowledge of specific niches. This has created a new business opportunity for operators such as Entel with their own network infrastructure.
Customers
In the Wholesale Segment, Entel expanded its customer
portfolio in 2014 and now provides networks and services
to 46 national operators, including VTR, Claro, Movistar
and Nextel, and 95 international operators, including AT&T,
Sprint, Vodafone and BT.
Around 38% of Entel’s revenue from the Wholesale Segment
in 2014 came from buying and selling international longdistance traffic generated in businesses dealings with over
70 operators active in 30 countries, allowing the company to
reach 195 countries throughout the world.
Around 31% of sales comes from network leasing for national transport, last-mile connections, international networks
90
and international IP access, while the leasing of towers to
telecommunications operators represents 15% of sales. Finally, MVNO and wholesale roaming activities made up 17%
of revenue.
Value proposition
The Wholesale Segment
provides services to 95
international operators and
46 national operators.
Entel’s objective in the Wholesale Segment is to be the
leading supplier of networks and services to national and
international operators, with broad national coverage and
remaining at the cutting edge of technological change. The
company aims for its customers to perceive it as a responsive and reliable supplier that offers excellent pre-sales,
provision, post-sales and technical service, backed by close
relationships with its customers via a permanent open communication channel.
eTOM Certification
The Enhanced Telecommunication Operations Map (eTOM)
certification process was finalized in 2014. After completing
the various outstanding courses, professional and technical staff across the Wholesale Segment were ready for the
application of this model, which has been specifically developed for this industry. The system is based on three areas:
strategy, which covers the adoption of functional processes,
the resources to manage products and the management of
customer relationships; operations, which focuses on alignment with the customer; and management, which involves
the processes necessary to ensure an efficient business.
One of the main advantages of the map is that it allows Entel
to align its business with our customers’ priorities through
company processes.
User experience
38%
of revenue comes from
buying and selling
international long-distance
traffic.
Significant improvements were made to service quality
abroad to drive the use of roaming services, helping improve the customer experience in an area that is experiencing
significant growth.
Similarly, the experience of customers with international
operators visiting Chile remained highly positive, with high
levels of satisfaction among users using the Entel network
for roaming.
91
Results
The year 2014 was marked by the positive performance of
the Wholesale Segment, with growth in infrastructure services for traditional and virtual mobile operators. Agreements
were also signed with international operators, helping
compensate for the slowdown in the Chilean economy, and
efforts were made to increase collaboration with operators
that recorded a low level of activity, delivering positive results that are reflected in an increase in EBITDA.
WHOLESALE SEGMENT – SHARE OF TOTAL SERVICES OF ENTEL
CHILE (2014)
MOBILE
SERVICES
2%
PARTICIPACION DE MERCADO MAYORISTA A TERCEROS EN
LOS INGRESOS BRUTOS DE ENTELCHILE 2014
THIRD-PARTY WHOLESALE SEGMENT – SHARE OF GROSS REVENUE
OF ENTEL CHILE (2014)
95%
5%
OTHER
SEGMENTS
FIXED
SERVICES
THIRD-PARTY
WHOLESALE
SEGMENT
20%
0
20
40
WHOLESALE SEGMENT
60
80
100
OTHER SEGMENTS
WHOLESALE SEGMENT – REVENUE BY SERVICE
THIRD-PARTY WHOLESALE SEGMENT – REVENUE
(CLP MILLION)
90000
80000
31%
77,041
73,972
70000
MOBILE
SERVICES AND
HANDSETS
13,468
60000
4%
24,201
50000
60,504
52,840
40000
30000
20000
69%
FIXED
SERVICES
10000
0
2013
MOBILE SERVICES
92
2014
FIXED SERVICES
93
Chaca School, Arica.
Teacher with students who
benefited from the
Todo Chile Comunicado
project.
50 _
YEARS
Connecting the Country
Entel welcomed more than three million people
in 1,474 rural areas to the digital world, providing
them with access to the benefits of globalization
through a joint initiative with the Chilean government to provide broadband coverage in isolated areas in Chile’s first large-scale connectivity project.
It is the largest public–private digital connectivity
initiative in the history of our country and is the
biggest project of this kind to have been implemented in Chile and Latin America.
2012
95
04
Sustainability
Sustainability
Entel’s wants to help transform people’s lives through
Ever since the earthquake of 1960, which gave rise to the
formation of the company and its raison d’être of helping the
people of Chile communicate, the company’s mission and
vision have been based around enabling access to telecommunications in Chile and a continuous commitment to close
the gap in connectivity.
connectivity and innovation.
2,600 MHz
700 MHz
» 181 areas
» 549 areas
» 44,831 beneficiaries
» 85,717 beneficiaries
» Investment: USD 48 million
» 212 schools
» 373 km of roads
» Investment: USD 170 million
Connected Schools
This spirit puts sustainability at the heart of how the company is run, with a policy that aims to service, understand
and satisfy the legitimate expectations and interests of the
company’s various stakeholders and contribute to the technological, social, economic and environmental development
of the country.
Connectivity and innovation are the guiding principles of
Entel’s initiatives in this area, with a focus on social wellbeing and the accessibility of telecommunications in Chile.
In 2014, Entel continued its longstanding tradition of promoting connectivity in schools through its Escuelas Conectadas
program in 2014. The program, which, aims to promote the
creation of a culture of innovation in schools by encouraging the use of technology in educational processes, covers
rural and isolated areas and provides establishments with
cutting-edge technology and technical support, supported
by digital training for teachers, educational boards and students in the educational and innovative use of information
and communications technology.
Closing the digital divide
Connecting Chile
As part of its commitment to increase connectivity in Chile and develop communications in the country, in October
2014, Entel began work on a major project that will provide
mobile telephone and Internet coverage to 730 isolated and
rural areas.
The initiative, which is part of investment requirements for
the rollout of the company’s 2,600 MHz and 700 MHz networks, will be implemented in two phases, the first of which
will benefit 181 communities, with the second covering the
remaining 549.
96
The schools that benefit from the initiative are encouraged
to make use of teaching activities that involve technology,
such as the Cognitive Tutor software, developed by the Computer Science department at the School of Engineering at
the Pontificia Universidad Católica, which was introduced
for teaching elementary-level mathematics to fifth and sixth
grade students. Guided by the teacher, the software helps
students make progress on their own based on repeatedly
practicing sums. An innovative method was also introduced
for language teaching in partnership with the consultancy
firm Buck Up based on projects and collaborative working.
In both cases, teaching is focused on students, providing the
teachers involved with help, support and training.
Children at a school in
Huape in the Los Ríos
Region, who received
Internet as a result of the
Todo Chile Comunicado
project.
350
employees involved
in Tengo una Idea.
40
projects were
selected.
50
In 2014, Entel was involved in digital training in four schools
throughout Chile: Valle de Chaca (Arica and Parinacota Region), Nirivilo (Maule Region), Bahía Murta and Puerto Aguirre (Aysén Region), and Barranco Amarillo (Magallanes and
Chilean Antarctic Region).
The application of the program was evaluated by testing
students before and after the activities using instruments
validated by the Ministry of Education. For elementary
mathematics, 95% of fifth graders and 69% of sixth graders reached the desired standard in the results, whereas
for language, 65% of both fifth and six grades reached the
desired standard.
As part of this initiative, Entel has provided training in the
use of technology in the classroom to a total of 238 teachers
and 2,747 students from more than 30 schools over the last
nine years.
Education
Partnership with Enseña Chile
million
CLP to fund the
winning projects.
To help reduce the educational gap in Chile, The Enseña
Chile Foundation recruits and trains professional-level staff
from different backgrounds to work as full-time teachers
for two years in vulnerable schools and colleges. Entel has
supported this commitment by contributing to the selection
processes for staff applying to the foundation, participating
as an exhibitor at various university talks and providing financial support for the foundation’s operations.
The goal of the initiative is for the participants to become role models for students and maximize their learning
achievements, presenting them with new opportunities and
transforming their expectations.
Enseña Chile is present in 73 state and subsidized schools
in four regions throughout the country and directly benefits
around 22,572 students. In 2014, the organization provided
140 places to young professionals to participate in the project, receiving more than 2,443 applications.
Corporate volunteering
Tengo una Idea
The Tengo una Idea (I Have an Idea) program grew in 2014,
with the presentation of 73 projects involving more than 350
employees throughout the country, from Arica to Punta Arenas. The initiative gives company employees the opportunity
to propose social projects that deliver benefits and added
value for communities and society as a whole throughout
the country. This year the budget for execution of the selected projects was CLP 50 million.
The panel selected 40 ideas from among those presented by
participants in a range of areas, including initiatives to promote healthy eating and the responsible ownership of pets.
Healthy eating – Concerned about the importance of eating
well, a group of employees presented a proposal to promote
healthy eating inside the company to help improve quality
of life. Under the initiative, from 2015, fruit baskets will be
97
handed out to workers in all corporate offices twice a week
to help provide them with access to a healthier diet.
Responsible ownership of pets – To raise awareness about
looking after pets, Jonathan Barreda, one of the 40 winners
from 2014, ran a session to promote the responsible ownership of pets in the city of Copiapó. A total of 48 dogs and nine
cats were sterilized as part of the activity, which took place
in August in partnership with the Pedro Longallo neighborhood association. Educational material was also provided to
promote the message of responsible ownership of pets to
over 250 people who attended the session.
These projects are complemented by the participation of
employees in the company’s traditional corporate volunteering activities for Children’s Day and Christmas.
The prize, which is now in its sixth year, also recognized the
work of the journalist Carlos Oyarce for the newspaper ‘El
Sur de Concepción’ for a piece entitled ‘The emotional history behind the launderette run by young people with down
syndrome’ in the Written Press – Features category, and
the newspaper ‘Diario Pulso’ won the Online category for
its multimedia piece on ‘The profitability of the sustainable
home,’ under editor Elizabeth Harries, while Play FM won
the Radio category.
For television, the Feature category was won by the TVN
journalist Carolina Cárcamo, with her piece on the ‘Afforestation of the Cajón del Maipo’ and the Special Report category was won by Mega’s Rafael Cavada, for his piece entitled ‘Living beside lead.’
Public spaces
This year, 52 activities took place to celebrate Children’s Day
throughout the country, attracting the participation of 780
volunteers and 3,952 beneficiaries.
The Christmas celebrations also saw the participation of
890 volunteers in 59 activities benefiting 49,770 people.
Sustainable journalism
PE.SU Sustainable Journalism Prize
The year 2014 was the sixth year of the PE.SU Sustainable Journalism Prize, run by Entel in partnership with the
Catholic University of Milan to reward and recognize works
of journalism and media outlets that cover and promote
sustainable development, social innovation and technological progress in Chile.
The competition received 173 entries, an increase in participation from previous years.
A group of reporters from the newspaper ‘El Mercurio,’ comprising Cecilia Derpich, Consuelo Cifuentes and Juan José
Lyon, were awarded the sixth PE.SU Sustainable Journalism
Prize for a piece entitled ‘Where does the rubbish we recycle
really go?’ The prize is run by Entel and the Catholic University of Milan, with backing from Ericsson.
Barrio Feliz
As part of its commitment to improve public spaces, in 2014
Entel continued to contribute to the restoration of infrastructure in vulnerable neighborhoods throughout the country though its Barrio Feliz (Happy Neighborhood) program.
This year the project focused on seven areas: Valparaíso,
Alto Hospicio, Chañaral, La Pintana, Coquimbo, Renaico and
Lautaro, recovering around 6,600 m² of space and benefiting over 1,600 families throughout the country. The company has also launched an initiative to allow its customers
to opt to receive bills for the services they use via email.
This has a double benefit on the surrounding environment,
helping reduce the consumption and printing of paper while
improving public spaces.
An initiative was also launched to recycle unused mobile
phones and accessories such as chargers, earphones and
batteries. The scheme has more than 300 collection points
installed in Entel, Mall Plaza and HomeCenter stores, as well
as Triciclos recycling stations throughout Chile. In 2014, a
total of 3.34 tons of material was recycled and disposed of
responsibly by the company Midas, with raw materials such
as metals and plastics in a new production processes being
reused.
Co-creation
The prize includes a trip to Milan, where the three journalists will take part in a five-day internship at the School of
Journalism at the Catholic University of Milan. Their work
also came first in the Written Press – Special Report category.
98
Social Innovation
In 2014, Chile’s first network of rural entrepreneurs was
created as the result of a partnership between Entel and the
iLabUC at Pontificia Universidad Católica de Chile. The part-
Students at the Rapa
Nui School of Music and
Arts, the first sustainable
establishment in Latin
America.
nership aims to promote initiatives that will create benefits
and positive changes in vulnerable communities.
6,600 m
2
recovered by Barrio Feliz,
benefiting over 1,600
families.
3.34
tons
of raw materials recycled
for reuse in 2014.
The RuEmprende network sells products and services that
are traditional in rural communities, helping promote the
identity and culture of the area and the story behind the enterprising initiatives undertaken by the network.
The initiative is a response to the needs of entrepreneurs
in the areas of Navidad and Pichidegua in the O’Higgins Region arising from co-creation activities with professionals
from the Innovation Laboratory at the Universidad Católica
(iLabUC) and receives support from Entel and the regional
government’s Competitive Innovation Fund.
The program involved activities to promote innovation, including entrepreneurship seminars in Pichidegua and training and networking activities for people starting their own
business. The activities were accompanied by seminars
organized by iLabUC and Entel, bringing together over 60
entrepreneurs and micro-entrepreneurs in Machalí, Pichidegua and Navidad at the Machalí Cultural Center to participate in a seminar on how to structure business models as
part of the ‘Innovation in rural businesses’ program.
The seminars are part of a project for the co-creation of a
regional digital ecosystem for innovation and entrepreneurship, jointly executed by iLabUC and the NGO Innovacien,
and co-financed by Entel and the Entrepreneur Environment Support Program run by the Chilean Economic Development Agency (CORFO). The main aim of the project is to
promote a community of learning and foster an ecosystem
of innovation based around digital and audiovisual tools in
the O’Higgins Region.
Reuse of waste and cultural preservation
The Rapa Nui School of Music and Arts
In 2014, Entel provided support for the construction of Rapa
Nui’s first sustainable music school headed by the NGO
Toki (led by the famous pianist Mahani Teave) and backed
by Desafío Levantemos Chile and the Municipality of Easter
Island.
The school serves two purposes: firstly, it aims to preserve
the culture of Easter Island through teaching music, dance
and language, and second, it aims to reduce waste on the
island by combining traditional construction materials with
cartons, bottles and old tires.
The work has been created by the US architect and head of
Earthship Biotecture, Michael Reynolds, known throughout
the world as the ‘garbage warrior.’ In addition to using recycled construction materials, the school also supplies its
own water and energy, and disposes of its waste in an environmentally friendly manner.
The school was operational in December 2014, with the
opening of its first rooms. Construction of the work is due
for completion in 2017, with the classrooms of this selfsustainable project expected to benefit over 225 Rapa Nui
students.
99
Bucalemu in the Libertador
General Bernardo O’Higgins
Region, part of the Todo Chile
Comunicado project.
50 _
YEARS
Evolving to be closer
Progress goes hand-in-hand with change, which
is why Entel has integrated its mobile and fixed
businesses under a new structure to better respond to the needs of the market. The business is
now organized to meet the specific needs of specific market segments – Consumer, Enterprise,
Corporate – and the other groups it serves.
2011
101
05
Results
Consolidated Results
In a year marked by the consolidation of Entel’s presence
in Peru, the company is in a solid
position to continue growing and reap the long-term rewards of current investment.
In 2014, Entel consolidated its presence in Peru, putting it
in a solid position to continue growing and benefit from the
long-term rewards of current investment. The potential of
the Peruvian market creates an opportunity for the company to replicate the business model that has been so successful in Chile over the last two decades.
As such, the analysis of the company’s results for the year
will reflect the initial impact of positioning the company in
Peru, which has entailed significant investment and marketing and sales costs, as well as increased levels of debt
to allow the expansion of the company’s infrastructure
and develop the necessary range of services to support its
long-term strategy. Entel’s solid financial position allows
the company to support the internationalization of its operations, expanding its modern infrastructure and comprehensive range of services into the Peruvian market to allow
more people to live better connected every day.
In Chile, 2014 was a year of changes in the telecommunications industry, particularly in the mobile area. Some of the
most important changes include an unprecedented 75% reduction in the mobile termination rate, with a major impact
on the number of prepaid customers and their activity, the
impact of measures to restrict products based on pricing
models with different tariffs for on-net and off-net traffic,
the high penetration of data usage in the customer base,
which reached 66% and continues to change the way that
people and businesses use services, and finally, the largescale penetration of smartphones in the prepaid market
between 2013 and 2014.
102
Against the backdrop of a significant economic slowdown,
these changes made this been a complex year marked by
the adjustment of the industry.
All the above factors caused the Chilean mobile industry to
contract by around 6% in terms of total revenue (compared
to 7% in 2013), with the prepaid segment suffering a fall in
the number of customers and expenditure. In business segments, the mobile market remained relatively flat in terms
of connections and declined slightly in terms of expenditure.
Businesses were also much less dynamic in terms of the
demand for new services, both fixed and mobile.
In this context, Entel’s business grew both in terms of the
number of high-value mobile customers and the penetration of mobile data.
Revenue for the period was CLP 1,688,052 million, driven
by the consolidation of the business in Peru, which, after
various months of preparation involving the rollout of network and a commercial support structure, successfully
launched a disruptive range of services at the end of 2014,
with 258,000 net additions in the fourth quarter.
The change in revenue is also explained by a significant
increase in data and IT services for businesses in Chile,
growth in Entel Hogar and the strong performance of Americatel Perú. This was partially offset by lower mobile revenue in Chile as a result of the reduction in access charges
and the economic slowdown, which have particularly affected the prepaid segment.
CONSOLIDATED RESULTS (CLP million)
2014
1,668,052
370,150
126,769
-44,434
-33,879
48,457
8,014
56,471
Consolidated revenue
EBITDA
Operating profit
Net financial expenditure
Exchange rate and adjustment of units of account
Pre-tax profit
Tax
Annual profit
2013
1,643,930
467,316
218,037
-18,891
-22,229
176,917
-29,952
146,965
% Change
1%
-21%
-42%
135%
52%
-73%
-62%
OPERATING REVENUE (CLP million)
Mobile telephone services (Chile)
Mobile telephone services (Peru)
Data services (including IT)
Local telephone services*
Long distance
Internet**
Services to other operators
Traffic business
TV services
Americatel Perú
Call center and other services
Other revenue
Total operating revenue
2014
1,150,532
151,729
136,842
50,568
26,961
24,097
22,988
28,080
18,020
25,450
8,000
24,784
1,668,052
2013
1,271,725
45,902
120,663
43,160
32,027
20,879
20,868
31,255
8,337
21,392
12,168
15,554
1,643,930
% Change
-10%
231%
13%
17%
-16%
15%
10%
-10%
116%
19%
-34%
59%
1%
* Includes traditional fixed revenue, NGN-IP and trunk IP sections.
** Includes revenue from Duo Empresa services.
Mobile telephone services Chile
At the end of 2014, Chile had a total of 10,102,117 mobile
customers, down 3% with respect to 2013 as a result of a
contraction in the prepaid segment and mobile broadband.
However, this is compensated by growth of 4% delivered by
Entel’s strategy in the postpaid segment (voice, largely with
data plans and mobile broadband), which makes up 35% of
the total customer base.
Revenue from mobile services in Chile fell by 10% in 2014,
largely as a result of the 75% reduction in the mobile termination rate, which took effect last January, and falling revenue from handset sales, primarily in the prepaid segment.
This was partially offset by an increase in revenue from mobile data services, associated with 41% growth in the use
of mobile Internet in line with the increased penetration of
smartphones and the growth of postpaid customers.
In a context of constant growth in data traffic and mobile broadband in Chile as a result of the penetration of smartphones and the large-scale adoption of mobile applications,
the company maintained growth in the number of mobile
Internet plans, driven by the improved browsing experience
offered by its new full multimedia plans and the attraction of
more postpaid customers through portability offers. At the
end of 2014, 66% of postpaid customers had plans or packs
that allow them to use data on their smartphones, a considerable increase from the figure of 55% at the end of 2013.
After the launch of the company’s 4G LTE network on the
2,600 MHz band at the end of March 2014, the service had
around 230,000 users at the end of the year.
Mobile telephone services Peru
In October, the company completed the change of branding
of its mobile operations in Peru, launching the Entel Perú
brand. This major milestone formally marked the launch of
the company’s operations in the Peruvian market under the
Entel brand, following its entry in 2013 with the acquisition
of 100% of shares in Nextel from the North American company NII Holdings.
The business completed its plan to develop its technical capacity through the large-scale expansion and upgrades to
its network, which is now the most modern in the country,
offering the best 4G LTE experience. This was complemen103
ted by the expansion of telecommunications infrastructure
to improve the quality and coverage of mobile services on
a daily basis.
The company is also strengthening its service channels to
allow it to provide the best possible service quality as part
of its drive to secure a major position in the Peruvian market, which is undergoing significant technological change as
part of the rapid evolution from voice services to data and
mobile Internet.
Entel Perú has implemented an innovative, integrated business strategy for both the Consumer and Enterprise segments, offering attractive promotions for high-value customers. The company offers cutting edge devices with plans
that provide high-capacity data and unlimited any-destination voice minutes, all with a view to becoming a major operator in the Peruvian market.
Backed by these activities, the Entel Perú brand was officially launched in October with a national advertising campaign that resulted in a high level of acceptance by the market, authorities and the general public, as evidenced by the
event trending on social networks.
All this meant that at the end of 2014, the Entel Perú international subsidiary had 1,738,450 customers, representing
growth of 11% with respect to 2013. Adding the users of this
new subsidiary to the existing customer base in Chile gives
a total of 11,840,567 customers.
Moreover, while 63% of Entel’s 1.6 million customers in Peru
at the end of 2013 were using iDEN technology, this proportion had fallen to just 39% of the company’s 1.7 million
users at the end of 2014, showing that beneath this modest
growth in the number of customers lies a significant change
in the technology they use.
Another extremely important element is the attractiveness
of the new brand and its services in terms of their ability to
attract sales, with the company gaining a significant number of high-value customers in the fourth quarter, following
the launch of the new brand. Another major factor has been
portability legislation reducing the time for transfers between operators to a single day. This has seen the company
capture 52% of all switches in the industry, which have in-
104
creased by an average factor of 5.5 every week since this
change.
Revenue from Entel Perú in 2014 was CLP 151,729 million,
driven by the growth in customers using 2G, 3G and 4G services.
Entel Hogar
The results are also due to significant growth in revenue
from Entel Hogar, which has seen attractive growth figures
as a result of its strategy to increase sales and penetration
in areas with a limited range of telecommunications services. The segment, which provides fixed telephone, Internet
and television services had a total of 275,987 contracted
services as of December 31, representing growth of 34%
with respect to 2013. Entel Hogar also increased the flexibility of its voice services with its Autopack product, allowing
a reduction in sales and installation costs.
Fixed voice, data and IT services
Integrated data and IT services associated with the Enterprise and Corporate segment registered growth of 13%,
driven by the incorporation of new solutions and services,
all based on Entel’s solid infrastructure and network quality.
The company provides a wide range of integrated solutions
for the business market, handling current business critical
processes, all supported by its infrastructure capacity and
robust data center. Products for SMEs are based on the
bundling of fixed and mobile services supported by Entel’s
solid mobile network infrastructure and GPON.
IT outsourcing, cloud management services based on mobile applications and the Internet of things were key factors in
delivering growth.
Infrastructure leasing and wholesale sales to other telecommunications and call center companies experienced a
fall in revenue, largely from wholesale sales, which were
affected by the consolidation of the company’s mobile operations in Peru (Nextel Perú was a client prior to the acquisition). Additionally, revenue from the traffic business fell as
a result of less traffic and lower tariffs, although this was
partially offset by an increase in revenue from infrastructu-
BASE DE ABONADOS MOVILES (%)
re leasing due to higher revenue from the leasing of infrastructure to other fixed, mobile and virtual mobile operators.
Revenue for Americatel Perú was CLP 25,450 million at the
end of December, representing growth of 19% with respect
to 2013, largely driven by the increase in integrated IP services (voice, data and Internet) for the business segment
and satellite services, as well as the incorporation of business customers from Entel Perú. The annual increase was
slightly affected by a decline in long-distance revenue.
CUSTOMER BASE – ENTEL PERÚ (thousands)
2,000
1,738
19
1,569
1,500
171
1,556
1,493
112
397
111
1,051
978
44
25
910
843
500
775
328
325
262
Q3 13
Q4 13
Q1 14
0
The EBITDA margin was 29%, representing growth of 1 percentage point, which reflects the company’s efforts to deliver
efficiency. Excluding the impact of the Entel Perú subsidiary
and using comparable terms for the accounting of postpaid
handsets, EBITDA grew 2%, showing the business’s solid
position in the Chilean market.
Annual profit
Entel’s profit for 2014 was CLP 56,471 million, a fall of 62%
with respect to CLP 146,965 million in 2013, largely explained by lower operating profits from the mobile business in
Peru and increased financial expenditure related to a higher
level of debt and the higher costs of instruments denominated in the UF unit of account as a result of higher inflation.
996
620
86
1,000
EBITDA
EBITDA for the year was CLP 370,150 million as of December 31, 2014, 21% lower than the figure of CLP 467,316 million for 2013 as a result of the rollout and launch of the
Entel Perú mobile operation and, to a lesser extent, the
impact of lower termination rate. This was partially compensated by improvements in the Enterprise and Corporate
segments, together with the operations of Americatel Perú
and call centers.
1,480
1,453
211
142
MBB
iDEN
HPPTT
679
126
42
39
Q2 14
Q3 14
Q4 14
4G/3G/2G
CONSOLIDATED REVENUE BY SERVICE TYPE
1%
3%
AMERICATEL PERU
ENTEL HOGAR AND OTHER
RESIDENTIAL**
16%
2%
CALL CENTER
AND OTHER REVENUE
FIXED ENTERPRISE
AND CORPORATE*
9%
MOBILE PERU
69%
MOBILE CHILE
* Integrated services (voice, data and Internet) in the Enterprise and Corporate
segments, and network leasing and traffic business.
Similarly, a reform to the Chilean tax system was approved
in September 2014, resulting in a positive impact of CLP
9,864 million on deferred taxes, accrued as equity in line
with Circular No. 856 of the Chilean Superintendency of Securities and Insurance.
105
Campaign to launch
the Entel Perú brand, October
2014.
50 _
YEARS
Expansion in Peru
In 2013, Entel took a major step in the expansion
of its brand in the Peruvian market with the acquisition of 100% of shares in Nextel Perú, the third
largest mobile company in the country. In 2014,
the company upgraded its infrastructure and
made significant investment in the commercial
side of the business with the launch of the Entel
Perú brand, positioning the company as a regional
brand in Latin America.
2013
107
06
Subsidiaries
Entel Perú
With the country’s most modern infrastructure, Entel Perú covers all sectors of the Peruvian
market, offering its customers a differentiated user experience in both the Consumer and
Enterprise segments.
»» Successful launch of the new Entel Perú brand, focusing on the
Consumer Segment.
»» Net growth of 258,000 customers during the fourth quarter,
following the launch of the brand.
»» The only operator with iDEN 2G, 3G and 4G, services, doubling its
points of presence.
»» Best 4G LTE coverage with the most modern infrastructure in the
country.
»» Extensive rollout of points of sale and development of wholesale
sales network of around 60%.
»» Leadership in mobile portability, especially among high-value
customers.
Context
With a dynamic economy, a stable regulatory framework
and low penetration of mobile Internet, the Peruvian market
has significant potential for growth. Peru has a population
of 30 million and a mobile penetration of 96%, (according to
the Bank of America Merrill Lynch). This figure is well below the level in Chile (129%, according to the Department
of Telecommunications), and far below the average of 120%
in the OECD countries. The penetration of these services
108
differs considerably from the penetration of data services,
which is around 20% of postpaid customers.
This context, together with upgrades to technology and the
modernization of services, presents a major opportunity to
meet the needs of increasingly well informed users who
demand high quality from mobile operators. Entel’s infrastructure is a key factor to competing in this high-potential
market, which is evolving from voice services to the intensive use of mobile data. The company has the most modern
platform in the country and is the only operator with iDEN,
2G, 3G and 4G services, as well as having the highest 4G LTE
coverage in Peru.
Launch of Entel Perú
In 2014, Entel began to consolidate the acquisition from NII
Holdings of a 100% share in Nextel Perú, a company which
had previously been focused on the Enterprise Segment.
With a strong and successful campaign to position the new
brand, the switch from Nextel to Entel Perú was completed in October. The objective is for the brand to become a
universal mobile operator, servicing all segments of the Peruvian market and offering customers a differentiated user
experience.
In preparation for the launch of Entel Perú, which implied a
strategic change of focus from enterprises to consumers,
the company achieved a number of major milestones, including upgrading and expanding its network of 2G, 3G and 4G
services, doubling the number of points of presence (PoPs)
Highly successful launch
of the new brand with the
company positioning itself in
the high-value segment.
725
points of sale throughout
the country, with Entel Perú
doubling its contact points.
BRAND RECOGNITION
53%
Spontaneous
25%
13%
8%
OCT. 2014
2%
NOV. 2014
DEC. 2014
OCT. 2014
4%
NOV. 2014
DEC. 2014
84%
Assisted
44%
39%
16%
OCT. 2014
NOV. 2014
DEC. 2014
6%
10%
OCT. 2014
NOV. 2014
ENTEL
DEC. 2014
NEW COMPETITOR
to more than 1,700, and completing the most modern infrastructure in Peru. To develop its sales network, the company increased the number of points of sale by 60%, giving
it an extended presence in areas of interest.
11%
increase in the
number of
customers in 2014.
Despite the fact the Peruvian industry is marked by an 80%
usage of prepaid services, the launch strategy was complemented by attractive subsidized offers for high-end handsets with innovative plans, helping attract high-value customers and position the brand in a market that until recently
had only two operators. The successful launch allowed
Entel Perú to obtain 64,412 customers through portability in
less than two months, leading the market in this area.
As a result of the launch strategy and the successful positioning of the brand, Entel Perú finished the year with over
1.7 million customers.
STRATEGY
Product range and brand development
Entel Perú has focused on developing a brand with attributes of closeness to customers and approachability, taking
advantage of the user experience delivered by improved
browsing options, particularly from its 4G network, backed
by its excellent customer service.
By offering any-network minutes, expanding the range of
data and focusing on high-value customers, the company
also added new functionalities and services specific to the
Consumer Segment.
Significant growth in sales activity
among both consumers and
enterprises.
Territorial rollout (Network and PoS)
During the period, progress was made in covering the main
cities and roads, as well as strengthening the indoor network. To provide a quality service that allows users to have a
satisfactory experience, 100% of the network was upgraded
(810 sites), complemented by 770 on-air sites.
In parallel to this, the company increased its points of sale
to support growth in the number of customers with points of
service, increasing the number from 356 points of customer
contact to 725 at the end of the year.
This is supported by the expansion of the wholesale distribution and top-up network.
Distinctive Experience
Backed by our aim of providing a distinctive experience,
Entel Perú consolidated its customer-focused culture in
2014. Over the year, the company reorganized its management model, putting in place a multi-channel, sub-segmented strategy that is coherent with the value and expectations
of its customers.
The match between the products offered and service is
clear from previous service quality indicators. In a study by
GFK, Entel Perú had satisfaction indicators of 61% for data
signal quality (23% above the closest competitor), 60% for
service quality (20% clear of the competition) and 61% for
transparency (12 points clear of the second operator).
The company was also the mobile operator with the best
results for call quality in terms of the rates of unsuccessful
attempts and interrupted calls, with a trend of improvement
during the final months of the year. In December 2014, the
rate for unsuccessful attempts was 0.07%, which was 30%
lower than the closest competitor (1.39%), while the dropped call rate was 0.57%, almost half the figure for the closest competitor (1.12%).
Portability
With a market share of around 6% at the close of the year,
Entel is the third largest mobile company in Peru. With services that provide full 4G coverage and unlimited voice plans
for users, the company successfully completed its entry into
the Consumer Segment as a major competitor, obtaining the
preference of customers and setting the target of reaching a
share of around 25% in the medium term.
109
TRENDS IN TECHNOLOGY
Postpaid voice customer base
1,000,000
900,000
719,203
748,324
762,840
698,681
733,661
675,633
115,708
147,782
189,140
231,103
283,650
320,173
355,301
420,855
110,555
103,111
97,049
86,426
61,136
51,600
43,927
37,520
800,000
700,000
600,000
500,000
663,183
659,667
73,976
90,205
129,790
118,756
804,088
664,190
400,000
857,786
504,037
562,667
31,098
24,533
459,417
450,706
437,927
424,740
412,492
401,674
388,875
376,551
363,612
345,713
322,651
299,743
JAN-14
FEB-14
MAR-14
APR -14
MAY-14
JUN -14
JUL -14
AUG-14
SEP-14
OCT -14
NOV-14
DEC-14
300,000
200,000
886,943
100,000
0
iDEN
HPPT
2G/3G/4G
VOICE
* Excludes MBB
The success of this strategy was reflected in the figures for
portability, which was relaunched on July 16 with the time
frame for switching operator reduced from seven days to 24
hours. At the end of December, according to official figures
from the Peruvian regulator Osiptel, Entel comfortably led
portability figures, with a net balance of 11,517 prepaid customers, almost ten times more than the nearest competitor.
The corresponding figure for postpaid customers was a net
increase of 59,352, which represents 60 times the number
obtained by the nearest competitor.
Human capital
In 2014, Entel continued the integration of its operations
through the restructuring of the company, with a focus on
providing a distinctive structure to enable it to respond efficiently to the needs of its customers. Entel strengthened its
sales force and doubled the number of customer contact
points throughout the country, taking the number to 725 at
the end of the year.
Providing quality service is a key aspect of the company’s
strategy and its employees are an important part of the
principles that drive Entel. The company directly employs a
workforce of around 2,200, which is complemented by indirectly employed staff, all of which are contracted in line with
the relevant employment law.
Customers
With a focus on latest-generation equipment and a reliable
4G connection backed by the country’s most modern infrastructure, Entel Perú had a total of 1,738,450 customers at
110
the end of the year, a net increase of 11% with respect to December 2013, with average revenue per user of CLP 8,252.
Regulatory framework
In 2014, regulatory initiatives approved for the sector have
placed an emphasis on making the telecommunications
market more dynamic to address the lack of competition in
the industry, which is currently dominated by two operators.
In December 2013, the Private Investment Supervisory Body
for Telecommunications (Osiptel) began the review process
for the mobile termination rate, which was set at USD 0.04
per minute at the end of the year. The process will be completed in 2015, when there is expected to be a reduction in
the charge for mobile operators when users make calls to
other operators.
The mobile charge is a significant factor in the price of calls
to other operators and its reduction will allow new challengers, such as Entel, to compete with the largest operators
in the market.
In the specific case of the mobile market, July 2014 saw
the implementation of a key measure designed to stimulate
competition, cutting the time frame for number portability
from seven days to one, as well as reducing the number
of requirements to be met by the customer to request the
transfer of their number. The results of this measure have
exceeded all expectations: in the previous four years (2010
to June 2014), number portability in Peru only recorded a
total of 268,911 transfers, whereas in the five months following the launch of portability in one day (July–December
2014) there were 164,694 transfers.
TRENDS IN TECHNOLOGY
Prepaid voice customer base
1,000,000
900,000
812,347
800,000
700,000
600,000
500,000
687,513
721,899
632,548
650,112
675,603
441,136
431,279
419,012
411,326
405,875
391,454
378,853
166,322
201,269
231,100
264,277
281,638
330,445
433,494
JUL -14
AUG-14
SEP-14
OCT -14
NOV-14
DEC-14
565,857
567,441
573,877
593,519
607,456
561,071
496,639
483,016
471,825
458,720
449,977
69,220
78,057
95,618
115,159
143,544
JAN-14
FEB-14
MAR-14
400,000
300,000
200,000
100,000
0
iDEN
2G/3G/4G
VOICE
APR -14
MAY-14
JUN -14
* Excludes MBB
This measure was complemented by two other significant
regulatory initiatives designed to stimulate competition in
the mobile market. The first of these is the Mobile Virtual
Network Operators Act, which allows individuals or legal
entities without a concession to provide mobile services to
users using the networks of currently established mobile
operators. The regulations for this legislation are currently
being debated by the sector and are expected to be approved during the first quarter of 2015.
Secondly, from January 2015, the Private Investment Supervisory Body for Telecommunications (Osiptel) has ruled
that mobile operators must sell unlocked handsets, allowing
their use with any operator, either national or international.
Osiptel also fixed a limit for the fees mobile operators can
charge users for unlocking phones in line with the acquisition of handsets, helping reduce the costs for switching
between operators.
40%, with a requirement to meet a level of 80% for at least
one hour a day.
The regulation also requires operators to make tools available to measure Internet speeds on their websites and on
smartphones and tablets sold to their customers. This Internet regulation will apply from April 2015.
The regulatory outlook for the local market for 2015 is expected to be as active, if not more so than in 2014. During
the year, Osiptel will establish the new mobile termination
rate payable by operators during the period 2015–19, which
will help increase competition in the market.
Another significant measure approved in 2014 was legislation allowing the rollout of telecommunications infrastructure approved last July, establishing a mechanism of
automatic approval by municipalities for the installation of
antennas, subject to oversight after the submitted documentation has been reviewed. This will help reduce current
gaps in coverage. The regulations for this legislation are currently being drafted and debated.
If passed they will have a major effect, given the demanding
and measures approved in 2014 by the regulator in terms
of coverage and service quality. In October 2014, Osiptel
published a new Quality Regulation, which, among other
new material, regulates the minimum browsing speed that
operators must guarantee users. The speed has been set at
111
06
Subsidiaries
Americatel Perú
Entel has consolidated its range of products and services, p
roviding
a range of options to
meet the needs of the Enterprise and Corporate segments in Peru.
»» Growth in the NGN service for the Enterprise Segment, with more
than 9,000 businesses passed.
In 2014, Americatel Perú had over 6,000 Enterprise and
Corporate customers, driven by growth in IT services, the
acquisition of the WiMAX portfolio from Entel Perú and the
continuous increase in the company’s traditional services.
»» Management of the Nextel Perú WiMAX portfolio for fixed
broadband services. Over 12,000 points passed, taking into account
NGN and the acquired portfolio.
Satellite services
»» Launch of NGN LTE in October, providing plans with increased
bandwidth to meet new market requirements.
At the end of 2014, Americatel Perú provided satellite services to a portfolio of 180 customers via a total of 555 points,
increasing its share of revenue in the market from 7% to
11%. The company aims to deliver growth through a longterm vertical prospecting strategy and the development of
new products that will allow it to increase the number of
potential customers for the service. It also aims to increase
the profitability of the business through actions that allow it
to reduce costs.
Custom bundles
The company increased its penetration of the SME market during the year, largely as a result of the success of its
Americatel NGN product, which includes telephone services, Internet, centrex and other value-added services. The
company’s market share of this segment is now 13%.
Over the last year, the number of contracted points for this
service increased to over 9,000, making it possible to reach high levels of usage in the company’s WiMAX network
capacity among high-value customers. Similarly, in October
2014, NGN LTE plans were launched, increasing the bandAnnual Report 2014 - For Translation Purposes Only
112
width available to customers in response to the new market
requirements.
In the Corporate Segment, Americatel has a total penetration of 65%, with the figure for services provided over its
own access network standing at 45% (telephone, Internet,
data, NGN, satellite and IT services). Fixed portability took
effect in August 2014, creating an opportunity to increase
the number of fixed telephone customers.
Wholesale Segment
30%
increase in EBITDA during
the period.
6,000
Enterprise and Corporate
customers recorded by Americatel
as a result of growth in IT services.
The Wholesale Segment’s main service is incoming International long-distance traffic. With a combination of strategies
to ensure the profitability of its national transport network
and direct interconnections with other operators, the company achieved a historical record in terms of profitability,
increasing its direct margin by 17% with respect to 2013.
These strategies made it possible to reach a market share
of 20% of incoming fixed network traffic in Peru. In 2014,
Entel Perú also consolidated its position as the largest international termination supplier, handling 80% of traffic, as
of December 2014.
In terms of wholesale data services, the company’s strategy
aims to position the company as an operator whose comparative advantage lies in the speed of providing quotations
and carrying out installation work. The company has also
focused on the profitability of its local transport backbone,
through which it provides high-capacity circuits to telecommunications operators. These strategies have made it
possible to increase the loyalty of customers such as AT&T,
British Telecom, Orange and Entel, increasing turnover by
over 30% and the direct margin by over 35%.
Residential Market
In 2014, Americatel provided long-distance services to
75,000 contract customers (90,000 plans), 8,000 customers
with a monthly dial-around service and 26,000 monthly mo-
bile origin dialers. In terms of fixed origin services, the company has a market share of 13% of national long-distance
services and 41% of international long-distance. For mobile
origin services, its share is 3% among both prepaid and postpaid customers.
The company has optimized its marketing activities to maximize the profitability of long-distance services, emphasizing
the communication of low prices and brand recognition. It
has also optimized the resources used for campaigns for
sales and the retention of long-distance plans, delivering
significant savings in call center resources.
Revenue from the market as a whole fell 26% between 2014
and 2013 as a result of the replacement of national and international long-distance products by alternatives such as
Internet and VoIP but primarily because of the transition
from fixed to mobile origin traffic. In fact, mobile operators
developed an aggressive pricing strategy, with tariffs 90%
lower than Americatel international long-distance dialaround and 40% lower than the contracted tariff. However,
in spite of these reductions at market level, Americatel traffic fell by 20% and 17% for national and international longdistance, respectively. In both cases, the reduction was the
lowest in the market.
The contraction of the market and the pressure on prices
has affected results in this segment. However, the effects
have been partially offset by the optimization of investment
in marketing and the use of call center resources.
The user experience of Americatel’s long-distance products
was evaluated as highly positive by its customers. The Top
to Box study in October for fixed-origin services rated satisfaction at 75% for image and 80% for quality. Similarly, the
net satisfaction index among postpaid mobile-origin customers was 80%, with a figure of 88% for prepaid, both in the
dial-around segment.
113
GROSS REVENUE (USD thousand;
PEN–USD exchange rate: 2.990)
REVENUE BY SERVICE
30%
50,000
SERVICES
WITHOUT ACCESS
40,000
30,000
18%
47,404
40,085
25,886
32,963
14,212
14,431
2013
2014
20,000
10,000
70%
SERVICES
WITH ACCESS
0
SERVICES WITH ACCESS
Results for Americatel Perú
The close of the year for Americatel Perú was marked by
its operational management and financial results, which
reached record highs in 2014, as a result of sustained and
sustainable growth.
The international trend for the decline in long-distance services has led the company to shift its emphasis to products
that provide access, focusing on satellite services, NGN via
the launch of LTE, and taking over Entel Perú’s fixed broadband business. This is complemented by a strong range of
data center services, including hosting and housing, which
has allowed the company to continue creating value for its
customers.
Revenue for the year was USD 47.4 million, representing a
growth of 18% with respect to 2013, and EBITDA was USD
9.8 million (including the distribution of profits), which represents growth of 30% with respect to the previous year.
The EBITDA margin increased by 2% to reach 21% in 2014.
SERVICES WITHOUT ACCESS
venue of USD 12.7 million, up 4% from the previous year, as
a result of the increased customer base, contrasted with a
2% fall in ARPU.
Satellite services closed the year with 554 points and revenue of USD 7.4 million, equivalent to a 31% increase with
respect to the previous year and representing 25% of revenue for the Enterprise Segment. For IT, an aggressive
strategy for IaaS and SaaS hosting delivered 57% growth in
revenue over the year.
In the mass-market segment, revenue fell by 13.6% with
respect to 2013 as a result of the natural replacement with
new Internet-based technologies that is affecting the market, although this has been offset by defensive strategies
making it possible to mitigate the reduction. These include promotions to increase mobile-origin Multicarrier traffic
and revenue which, within the category, saw revenue growth
of 1% during the year.
Annual revenue growth in products providing Internet access was 12%.
The Wholesale Segment saw growth in both the traffic business, as a result of bilateral agreements with Entel Perú,
AT&T and Teletel delivering an increase of 17% with respect
to 2013, and infrastructure leasing, which grew by 31%.
In the Enterprise Segment, revenue grew by 15% with respect to 2013, consolidating the NGN operation and increasing the range of new plans with LTE technology, making
it possible to maintain a controlled churn of 2% of points
billed, a slight increase of 0.05% on the previous year. This
is complemented by growth of 4% in the end base, and re-
The 30% increase in EBITDA with respect to the previous
year is not only a result of higher revenue but also of significant savings and the control of costs, which has made
it possible to improve margins. Indirect costs only grew by
16% with respect to the previous year, which is less than the
total increase in revenue of 18%.
114
EBITDA (USD million;
(PEN–USD exchange rate: 2.990)
12,000
10,000
8,000
30%
9,785
7,524
6,000
4,000
2,000
0
2013
2014
Investment
Americatel invested USD 8 million in 2014. The bulk of this
investment (32%) was used to provide equipment for customers, mainly for NGN services and dedicated Internet.
One of the most important projects was the rollout of the
2.3 GHz LTE network with 28 base stations to offer competitive speeds in the market. The year also saw the completion
of the expansion of Tier III data center and external plant to
provide business services.
115
06
Subsidiaries
Entel Call Center
With a mission of providing effective customer contact via
robust contact center solutions,
Entel aims to provide multi-channel operations that make it possible to deliver an a
comprehensive service.
Profile
»» COPC® GMD certification for three help desks.
»» Addition of 196 positions to operations in Chile.
»» Implementation of a complementary end-to-end fulfillment
service whose operating technology makes it possible to increase
the effectiveness of product delivery from 45% to 70%.
»» ISO 9001:2008 re-certification of Servicios Call Center Perú.
»» Entel Call Center is the second largest operator in the Chilean
market, with 18% of total positions for outsourcing services and is
also a major player in the Peruvian market.
Entel Call Center was created to meet the requirement of
Entel S.A. to provide a timely and efficient response to its
customers’ requirements. In a competitive market, the company has been able to successfully deliver integrated services with a strategy based on expanding its business line. Its
success is reflected by over 60 customers that place their
trust in Entel Call Center, including public bodies (Ministry of
Health, Civil Registry, Ministry of Social Development), financial institutions (Banco de Chile and BBVA), retail businesses
(Puntos Cencosud) and commercial companies (Derco, Soprole and Abastible).
The company has local and international operations, with
three sites in Chile and Peru, where it supports the growth
of Entel Perú and other customers, such as Americatel Perú,
Bcp, Auna, Ripley, Lider and ACE Seguros.
Context
The growing demand among customers for efficient, personalized service has created a requirement for multi-channel
services that integrate social networking platforms, mail,
chat and robust contact center solutions, occasionally complemented by fulfillment services. The diversification and
quality of its services has allowed Entel Call Center to capture new customers and expand its business lines, with a
focus on providing customer service that meets the highest
standards on the market.
116
With infrastructure built and fitted out to meet the highest
standards of quality, the company’s sites are specially designed for the contact center business, with each providing
the safety, comfort, lighting and climate control required to
guarantee an optimum working environment for more than
5,622 employees in both countries.
The company has a workforce of 3,098 in Chile, with 1,894
employees directly contracted by Entel Servicios de Call
Center or Entel Servicios de Contact Center. In Peru, staff
are employed by Servicios Call Center del Perú and the total
workforce 2,320.
15%
growth in revenue 2014
Strategy
Expansion
To provide end users with quick and accurate solutions and
deliver high levels of customer satisfaction, Entel Call Center aims to achieve a highly efficient first contact resolution,
based on an approach that is not restricted to telephone or
in-person service and encompasses multiple communication channels. Entel understands that it forms part of the
value chain of its users and establishing interaction with
end users and customers is a priority objective. As such, the
services provided are at the cutting edge of current requirements, offering integrated solutions encompassing social
networks, MSI mobile, email, SMS, chat and click-to-call, all
structured around a single, centralized source of information.
The company has 1,688 positions in Peru, with a usage level
of 98%. Work is underway to add a further 280 positions to
meet the growing demand for services.
Customer satisfaction
In 2014, Entel Call Center obtained COPC® GMD certification
for three of its help desks: the help desks for smartphone
customers in the Consumer and Enterprise segments and
the help desk for the Civil Registry. This reaffirms the high
operational standards of Entel Call Center and its commitment to deliver quality service.
Entel Call Center manages the customer experience through
tools that provide service level indicators, backed by a robust technology platform that makes it possible to manage
interactions with all the information required. This is a vital
part of ensuring the quick and effective delivery of solutions,
alongside recruitment and training processes.
To ensure the continuous improvement of its services, the
company measures critical error and non-critical error accuracy on a monthly basis, comparing the indicators with
the satisfaction results for end users. Improvements were
detected both at executive level (vertical view) and at business process level (across the business).
In Chile, there was a total of 2,600 positions in 2014, 2,200
of which are allocated.
Over the last year, the company added 196 positions to its
site at Curauma. These have been complemented by the
addition of 98 positions at the General Mackenna site and
the return of the Amunátegui site in Santiago.
Certification of services
Recertification of quality
To ensure its quality management system is up-to-date, in
2014, the subsidiary Servicios Call Center Perú undertook
an internal audit process to obtain recertification under the
ISO 9001:2008 standard, the results of which are expected
at the start of 2015.
117
Results
Services
In a competitive market, the focus on delivering efficiency
and quality in the services provided by the company has
made it possible to maintain margins and high levels of customer satisfaction. These efforts are reflected in the trust
placed in Entel by its customers and improved results.
Multi-channel services
Implementation of multimedia services, social networks,
chat, single platforms and platforms to complement existing remote services as part of a single service independent
of the point of contact, with customer and service information integrated into existing channels.
Consolidated revenue for Entel Call Center was CLP 41,694
million as of December 2014, representing annual growth
of 15%, which was driven by Servicios Call Center de Perú,
whose activity increased as a result of Entel’s expansion in
the country and the increase in sales services.
EBITDA increased by 21% with respect to 2013, largely due
to increased revenue from Servicios de Call Center de Perú,
together with cost efficiencies in both Chile and Peru.
Back office services
Implementation of services to support customer service
as part of a closed cycle, adding value in the resolution of
administrative, control and monitoring tasks for individual
businesses.
CONSOLIDATED REVENUE FOR ENTEL CALL CENTER
CLP million
Values expressed under IFRS
45.000
40.000
15%
Service desk
Technical support help desks for Entel Group companies
and external customers. A service focused on first contact
resolution to increase service availability, reduce costs associated with repeat occurrences and provide effective support for services delivered on the ground.
41,694
36,278
35.000
30.000
Sales campaigns
Consultative sales services, telemarketing and billing based on customer requirements, incorporating delivery services to provide sales support all the way to the delivery of
the product to the end user.
25.000
20.000
15.000
10.000
5.000
0
2013
2014
Customer service
Inbound service models based on market best practices,
implemented using technologies such as IVR, CRM and service flows to meet business requirements, ensuring a quality service and the satisfaction of end users.
CONSOLIDATED EBITDA ENTEL CALL CENTER
21%
4,500
4,000
4,582
3,799
3,500
3,000
Technology services
Implementation of on-demand technology platforms, including world-class technology tailored to meet specific customer requirements, including control platforms, business
intelligence and CRM services.
2,500
2,000
1,500
1,000
500
0
2013
2014
118
119
Printing
Ograma
Design
www.filete.cl
120
FINANCIAL
INFORMATION
50_YEARS
Company Information
1 .
2 .
3 .
Articles of Incorporation
Company Ownership
Company Structure
Dividend Policy
Investment Policy
Finance Policy
Distributable Profits
Dividends per Share
Summary of Transactions
Stock Market Presence
Share Transactions
Financial Activities
Risk Factors
Comparative Performance of Shares
Shareholder Comments
Material Events
Insurance
Suppliers
Declaration of Responsibility
04
04
10
11
12
13
13
14
14
14
15
15
16
18
18
18
20
21
23
Consolidated Financial Statements
Independent Auditor Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Certificate of Accounts Inspectors
26
28
34
121
Subsidiary and Affiliate Companies
Consolidated Balance Sheets for Subsidiaries
Note:
Corporate information is
provided in a separate volume.
124
1.
COM_
PANY
INFOR
MATION
Entel Chile S.A. was incorporated as a corporation by public
deed, issued before notary Jaime García Palazuelos in Santiago on August 31, 1964.
The company and its articles of incorporation were approved
by Supreme Decree No. 5,487, issued by the Ministry of the
Treasury on December 30, 1964.
The relevant extract can be found on page 381, No. 191, and
the aforementioned decree on page 384, No. 192, of the Santiago Trade Register, dated January 18, 1965, and published
in the Official State Gazette on January 20, 1965. The company was declared legally established by Supreme Decree No.
1,088, issued by the Ministry of the Treasury on April 4, 1966.
Name or Company Name
The company statutes have subsequently undergone a number of modifications to ensure compliance with Decree Law
No. 3,500 (1980) regarding the number and nationality of directors, the existence of alternative directors, increases in capital and expanding the areas in which the company operates.
Company Ownership
As of December 31, 2014, the capital stock of Empresa Nacional de Telecomunicaciones S.A. was distributed in 236,523,695
single-series shares, fully subscribed and paid-in by its 2,085
shareholders.
The 12 largest shareholders of Entel S.A. are listed in the table below, together with the size of their shareholding and its
percentage.
Shares on 12/31/2013
1
INVERSIONES ALTEL LTDA.
2
BANCO DE CHILE ON BEHALF OF NON-RESIDENT THIRD PARTIES
Share (%)
129,530,284
54.76%
24,654,149
10.42%
3
BANCO ITAU ON BEHALF OF INVESTORS
21,660,695
9.16%
4
BANCO SANTANDER ON BEHALF OF FOREIGN INVESTORS
10,119,375
4.28%
5
BANCHILE C DE B S A
3,575,222
1.51%
6
LARRAIN VIAL S A STOCK BROKER
3,419,745
1.45%
7
AFP PROVIDA S A FOR CLASS C PENSION FUND
2,643,352
1.12%
8
AFP PROVIDA S A CLASS B FUND
2,346,498
0.99%
9
AFP HABITAT S A CLASS B FUND
2,041,160
0.86%
10
AFP CAPITAL S A CLASS B PENSION FUND
1,788,390
0.76%
11
SANTANDER S A STOCKBROKER
1,721,790
0.73%
12
AFP CUPRUM S A CLASS B FUND
1,465,653
0.62%
Other
31,557,382
13.34%
Total
236,523,695
100.00%
4
Controllers
In compliance with General Regulation No. 30, Inversiones Altel Ltda., Tax ID 76.242.520-3, remains the controller of Entel
without any change and 129,530,284 shares, representing a
54.7642% stake in the Group. Inversiones Altel Ltda. is owned
by Almendral Telecomunicaciones S.A., Tax ID 99.586.130-5,
with a 99.99%, share and Almendral S.A., Tax ID 94.270.000-
8, with a 0.01% share. The individuals and legal entities that
directly and indirectly form part of the controlling group are
listed below.
Information contained in the shareholder register as of December 31, 2014.
Tax ID
Shareholder
Activities
(%)
96.878.530-3
Inversiones Nilo S.A. *
926,012,160
6.84%
96.895.660-4
Inversiones El Rauli S.A.
703,849,544
5.20%
96.969.110-8
Forestal Cañada S.A.
561,429,758
4.15%
79.770.520-9
Forestal y Pesquera Copahue S.A.
454,057,900
3.35%
94.645.000-6
Inmobiliaria Ñagué S.A.
358,008,491
2.64%
96.800.810-2
Inmobiliaria Canigue S. A.
287,874,051
2.13%
90.412.000-6
Minera Valparaíso S.A.
281,889,680
2.08%
96.791.310-3
Inmobiliaria Teatinos S. A.
215,905,538
1.59%
81.358.600-2
Cominco S.A.
154,795,552
1.14%
96.878.540-0
Inversiones Orinoco S. A.
143,937,025
1.06%
81.280.300-K
Viecal S.A.
95,058,166
0.70%
79.621.850-9
Forestal Cominco S.A.
78,666,592
0.58%
77.320.330-K
Inversiones Coillanca Ltda.
50,500,000
0.37%
96.656.410-5
BICE Vida Compañia de Seguros
16,424,086
0.12%
4.333.299-6
Patricia Matte Larraín
4,842,182
0.05%
4.436.502-2
Eliodoro Matte Larraín *
3,696,822
0.03%
6.598.728-7
Bernardo Matte Larraín *
3,696,695
0.03%
Grupo Matte (17)
4,340,644,242
32.07%
77.302.620-3
Inversiones Teval S.A.
1,290,595,292
9.53%
77.677.870-2
Inversiones Los Almendros Limitada
312,672,052
2.31%
Grupo Fernández León (2)
1,603,267,344
11.84%
96.950.580-0
Inversiones Huildad S.A.
1,129,980,943
8.35%
89.979.600-4
Inversiones Paso Nevado Ltda.
262,000,000
1.94%
96.502.590-1
Inversiones Metropolitana Ltda.
49,000,000
0.36%
Grupo Hurtado Vicuña (3)
1,440,980,943
10.64%
5
Information contained in the shareholder register as of December 31, 2014.
Tax ID
Shareholder
Activities
(%)
79.619.200-3
Consorcio Financiero S.A. *
894,655,313
6.61%
99.012.000-5
Cía. de Seguros de Vida Consorcio
405,540,420
3.00%
Grupo Consorcio (2)
1,300,195,733
9.60%
85.127.400-6
Inmobiliaria Escorial Ltda.
347,973,232
2.57%
96.927.570-8
Los Peumos S.A.
264,803,356
1.96%
79.937.930-9
Inmobiliaria Santoña Ltda.
105,842,165
0.78%
79.937.090-8
Andromeda Inversiones Ltda.
102,372,197
0.76%
79.942.850-4
Inversiones El Manzano Ltda.
79,280,486
0.59%
78.136.230-1
Santa Rosario de Inversiones Ltda.
63,260,509
0.47%
79.934.710-5
Comercial Marchigue S.A. *
42,090,874
0.31%
79.933.390-2
Andacollo de Inversiones Ltda.
38,996,296
0.29%
77.740.800-3
Inversiones La Estancia Ltda.
30,805,638
0.23%
77.174.230-0
Inversiones Los Ciervos Ltda.
5,936,539
0.04%
96.932.040-1
Los Boldos
3,124,495
0.02%
96.928.240-2
Santo Domingo de Inversiones S.A.
3,079,761
0.02%
76.072.917-5
Inversiones El Manzano II S.A.
3,079,761
0.02%
76.072.983-3
Andaluza de Inversiones II S.A.
3,079,761
0.02%
76.072.985-K
Inversiones La Estancia II S.A.
3,079,761
0.02%
76.073.008-4
La Esperanza S.A.
3,079,761
0.02%
79.966.130-6
Inmobiliaria e Inversiones Santa Sofía Ltda.
3,079,761
0.02%
76.381.035-6
Sociedad Colectiva Inversiones Los Ceibos *
3,079,761
0.02%
77.863.390-6
Cerro Colorado de Inversiones Ltda.
3,079,761
0.02%
Valdes Covarrubias Maria Teresa
2,471,777
0.02%
Inmobiliaria Estoril II S.A.
93,631
0.001%
4.431.346-4
96.962.800-7
Grupo Izquierdo Menéndez (21)
1,111,689,283
8.21%
96.949.800-6
Inversiones Green Ltda.
371,005,336
2.74%
96.949.780-8
Las Bardenas Chile S.A.
371,005,336
2.74%
Grupo Gianoli (2)
742,010,672
5.48%
77.85%
Controlling Group (47)
10,538,788,217
Minor shareholders (1,750)
3,000,833,815
22.15%
Total (1,797)
13,539,622,032
100.00%
* With shares held by stockbrokers.
Does not include shares classified as financial investments.
6
On January 24, 2005, the board of directors of Almendral S.A.
recorded the signing of a joint action shareholders agreement
by certain shareholders to take control of the company, with
each being a member of the controlling group.
The individual members of the controlling group are as follows.
Grupo Matte
The companies of Grupo Matte are directly and indirectly controlled by the following individuals in the indicated percentages:
>>Patricia
Matte Larraín, Tax ID 4.333.299-6 (6.49%) and siblings María Patricia Larraín Matte, Tax ID 9.000.338-0
(2.56%), María Magdalena Larraín Matte, Tax ID 6.376.977-0
(2.56%), Jorge Bernardo Larraín Matte, Tax ID 7.025.583-9
(2.56%), and Jorge Gabriel Larraín Matte, Tax ID 10.031.620K (2.56%).
>>Eliodoro Matte Larraín, Tax ID 4.336.502-2 (7.21%) and siblings Eliodoro Matte Capdevila, Tax ID 13.921.597-4 (3.27%),
Jorge Matte Capdevila, Tax ID 14.169.037-K (3.27%), and María del Pilar Matte Capdevila, Tax ID 15. 959.356-8 (3.27%).
>>Bernardo
Matte Larraín, Tax ID 6.598.728-7 (7.79%) and
siblings Bernardo Matte Izquierdo, Tax ID 15.637.711-2
(3.44%), Sofía Matte Izquierdo, Tax ID 16.095.796-4 (3.44%),
and Francisco Matte Izquierdo, Tax ID 16.612.252-K (3.44%).
b.Inversiones Teval S.A., whose ultimate controllers are:
- Grupo Fernández León, comprising Eduardo Fernández León (Tax ID 3.931.817-2), Valerie Mac Auliffe Granello
(Tax ID 4.222.315-8), Eduardo Fernández Mac Auliffe (Tax ID
7.010.379-6), Tomás Fernández Mac Auliffe (Tax ID 7.010.380K) and María José Cruzat Ochagavía (Tax ID 9.907.684-6) with
4.510%, 3.614%, 20.781%, 20.832% and 0.036% indirect shares of the company’s capital, respectively.
- Grupo Garcés Silva, comprising José Antonio Garcés Silva,
Tax ID 3.984.154-1, María Teresa Silva Silva, Tax ID 3.717.514-5,
María Paz Garcés Silva, Tax ID 7.032.689-2, María Teresa Garcés Silva, Tax ID 7.032.690-6, José Antonio Garcés Silva, Tax ID
8.745.864-4, Matías Alberto Garcés Silva, Tax ID 10.825.9833 and Andrés Sergio Garcés Silva, Tax ID 10.828.517-6, with
1.47%, 0.27%, 9.64%, 9.64%, 9.64%, 9.64% and 9.64% indirect
shares of the company’s capital, respectively.
Grupo Hurtado Vicuña
José Ignacio Hurtado Vicuña, Tax ID 4.556.173-9, María Mercedes Hurtado Vicuña, Tax ID 4.332.503-5, María Victoria Hurtado
Vicuña, Tax ID 4.332.502-7, Juan José Hurtado Vicuña, Tax ID
5.715.251-6, José Nicolás Hurtado Vicuña, Tax ID 4.773.781-8,
and Pedro José Hurtado Vicuña, Tax ID 6.375.828-0, directly
and indirectly, and in equal percentages, control the companies through which Grupo Hurtado acts as member of the controller Almendral S.A.
The shareholders listed above belong by kinship to the aforementioned corporate group and have a formal joint action
agreement.
Grupo Consorcio
Grupo Fernández León
- P&S S.A., with a share of 45.79% of the company’s capital.
P&S S.A. is controlled in equal percentages with a joint direct
and indirect share of 82.06% of the company’s capital, by José
Ignacio Hurtado Vicuña (Tax ID 4.556.173-9), María Mercedes
Hurtado Vicuña (Tax ID 4.332.503-5), María Victoria Hurtado
Vicuña (Tax ID 4.332.502-7), Juan José Hurtado Vicuña (Tax ID
5.715.251-6), José Nicolás Hurtado Vicuña (Tax ID 4.773.781-8)
and Pedro José Hurtado Vicuña (Tax ID 6.375.828-0).
a.Inversiones Los Almendros Ltda. (formerly Inversiones
Los Andes Dos Ltda.), whose ultimate controllers are Eduardo Fernández León (Tax ID 3.931.817-2), Valerie Mac Auliffe Granello (Tax ID 4.222.315-8), Eduardo Fernández Mac
Auliffe (Tax ID 7.010.379-6), Tomás Fernández Mac Auliffe
(Tax ID 7.010.380-K) and María José Cruzat Ochagavía (Tax
ID 9.907.684-6) with 4.356%, 3.061%, 46.232%, 46.257% and
0.010% direct and indirect shares of the company’s capital,
respectively.
a.Consorcio Financiero S.A., whose ultimate controllers are:
7
- Banvida S.A., with a share of 45.79% of the company’s capital. Inversiones Teval S.A. is controller of Banvida S.A. with a
share of 80.30% of the company’s capital.
5.742.959-3, with 99.79% and 0.21% direct shares of
the company’s capital, respectively. This company was
taken over by Santa Rosario de Inversiones Ltda.
b.Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A., whose ultimate controllers are the same as for
Consorcio Financiero S.A., through which they hold a 99.86%
share of capital of the former.
g. Andrómeda Inversiones Ltda., whose ultimate controller is Roberto Izquierdo Menéndez, Tax ID 3.932.4253 (22.158%), María Teresa Valdés Covarrubias, Tax ID
4.431.346-4 (1.660%), Roberto Izquierdo Valdés, Tax ID
9.099.538-3 (12.697%), Francisco Rodrigo Izquierdo Valdés, Tax ID 9.099.540-5 (12.697%), Luis Eduardo Izquierdo Valdés, Tax ID 9.099.537-5 (12.697%), José Manuel
Izquierdo Valdés, Tax ID 9.968.191-8 (12.697%), María
Teresa Izquierdo Valdés, Tax ID 9.099.215-5 (12.697%),
and María Josefina Izquierdo Valdés, Tax ID 9.099.218-K
(12.697%).
Grupo Izquierdo Menéndez
a. Los Peumos S.A., whose ultimate controllers are Santiago Izquierdo Menéndez, Tax ID 5.742.959-3 and Bárbara Larraín Riesco Tax ID 6.448.657-8 with 97.04% and
2.96% direct and indirect shares of the company’s capital, respectively.
b. Inmobiliaria Santoña Ltda., whose ultimate controllers
are Vicente Izquierdo Menéndez, Tax ID 5.741.891-5, and
María Virginia Taboada Bittner, Tax ID 6.834.545-6, with
93.02% and 6.98% direct shares of the company’s capital, respectively.
c. Inmobiliaria Escorial Ltda., whose ultimate controllers
are Fernando Izquierdo Menéndez, Tax ID 3.567.4888 and Ida Ester Etchebarne Jaime, Tax ID 5.418.932-K
with 59.7640% and 39.2460% shares of the company’s
capital, respectively.
d. Inversiones El Manzano Ltda., whose ultimate controllers are Diego Izquierdo Menéndez, Tax ID 3.932.428-8
(95.48%), María Isabel Reyes, Tax ID 5.748.650-3 (3.58%),
Diego José Izquierdo Reyes, Tax ID 17.402.993-8 (0.23%),
Pablo José Izquierdo Reyes, Tax ID 17.402.994-6 (0.23%),
María Isabel Izquierdo Reyes, Tax ID 18.018.196-2
(0.23%) and María Alejandra Izquierdo Reyes, Tax ID
18.636.111-3 (0.23%).
e. Andacollo de Inversiones Ltda., whose ultimate controllers are Gonzalo Izquierdo Menéndez, Tax ID 3.567.4845, and Luz María Irarrázaval Videla, Tax ID 5.310.548-3,
with 99.99% and 0.01% direct shares of the company’s
capital, respectively.
f. Santo Domingo de Inversiones S.A., whose ultimate controllers are Rosario Izquierdo Menéndez, Tax ID
5.548.438-4, and Santiago Izquierdo Menéndez, Tax ID
8
h. Santa Rosario de Inversiones Ltda., whose ultimate controllers are Rosario Izquierdo Menéndez, Tax ID
5.548.438-4 and Santiago Izquierdo Menéndez Tax ID
5.742.959-3 with 99.79% and 0.21% direct shares of the
company’s capital, respectively.
i. Inversiones La Estancia Ltda., whose ultimate controller is María del Carmen Izquierdo Menéndez, Tax ID
5.548.409-0 with a 99.99% of the company’s capital.
j. Inversiones Los Ciervos Ltda., whose ultimate controller is Diego Izquierdo Menéndez, Tax ID 3.932.428-8 with
a 99% share and María Isabel Reyes, Tax ID 5.748.650-3
with a 1% share of the company’s capital.
k. Inmobiliaria Estoril II S.A., 100% controlled by Inmobiliaria Estoril I S.A., whose ultimate controller is
the Izquierdo Menéndez family, of which the following
members maintain equal percentages: Matías Izquierdo
Menéndez, Tax ID 3.674.298-7, Vicente Izquierdo Menéndez, Tax ID 5.741.891-5, Santiago Izquierdo Menéndez, Tax ID 5.742.959-3, Roberto Izquierdo Menéndez,
Tax ID 3.932.425-3, Gonzalo Izquierdo Menéndez, Tax
ID 3.567.484-5, Fernando Izquierdo Menéndez, Tax ID
3.567.488-8,Diego Izquierdo Menéndez,Tax ID 3.932.428-8,
Rosario Izquierdo Menéndez, Tax ID 5.548.438-4, Gracia
Izquierdo Menéndez, Tax ID 5.742.317-K, Alejandra Izquierdo Menéndez, Tax ID 5.020.827-3, Carmen Izquierdo Menéndez, Tax ID 5.548.409-0.
l. Comercial Marchigue S.A., (now Inversiones Marchigue Ltda.), whose ultimate controller is Fernando Izquierdo Menéndez, Tax ID 3.567.488-8 (57.1295%), Ida
Ester Etchebarne Jaime, Tax ID 5.418.932-K (7.0248%),
Fernando Jose Izquierdo Etchebarne, Tax ID 9.156.8276 (7.1692%), Juan Agustin Izquierdo Etchebarne, Tax ID
9.156.812-8 (7.1692%), Cristian Tomas Izquierdo Etchebarne, Tax ID 15.642.698-9 (7.1692%), Francisco Izquierdo Etchebarne, Tax ID 12.027.838-K (7.1692%), Maria de
los Angeles Izquierdo Etchebarne, Tax ID 12.027.835-5
(7.1692%).
m.Los Boldos S.A., whose ultimate controllers are Rosario
Izquierdo Menéndez, Tax ID 5.548.438-4, and Santiago
Izquierdo Menéndez Tax ID 5.742.959-3 with 99.77% and
0.23% direct and indirect shares of the company’s capital, respectively.
Izquierdo González, Tax ID 10.184.749-7 (5.05233%), Sofía Izquierdo González, Tax ID 7.054.293-5 (5.62100%),
Matías Izquierdo González, Tax ID 7.636.577-6
(3.48437%), Paula Izquierdo González, Tax ID 7.054.289-7
(5.05233%), Nicolás Izquierdo González, Tax ID
10.367.413-1 (5.61370%), Pedro Izquierdo González, Tax
ID 10.364.156-K (5.59346%), Lucía Izquierdo González,
Tax ID 13.436.321-5 (5.61370%), Francisca Izquierdo
González, Tax ID 7.054.292-7 (5.60247%), Julio Izquierdo González, Tax ID 13.881.971-K (5.61370%), Rosario
Izquierdo González, Tax ID 18.465.113-0 (1.02067%),
María del Pilar Izquierdo González, Tax ID 13.233.182-0
(5.61370%).
o. Andaluza de Inversiones II S.A., whose ultimate controller is María Alejandra Izquierdo Menéndez, Tax ID
5.020.827-3, with a 99.99% share of the company’s capital.
s. Sociedad Colectiva Inversiones Los Ceibos, whose ultimate controllers with direct shares in the
company’s capital are Santiago Izquierdo Menéndez,
Tax ID 5.742.959-3 (24.164447%), Bárbara Larraín
Riesco Tax ID 6.448.657-8 (3.276344%), Santiago Izquierdo Larraín, Tax ID 16.365.276-5 (12.0932015%),
Martín Izquierdo Larraín, Tax ID 16.611.594-9
(12.0932015%), Benjamín Izquierdo Larraín, Tax ID
17.406.081-9 (12.0932015%), Bárbara Izquierdo Larraín, Tax ID 18.020.351-6 (12.0932015%), Gracia Izquierdo Larraín, Tax ID 18.641.299-0 (12.0932015%),
Lucas Izquierdo Larraín, Tax ID 19.893.205-1
(12.0932015%).
p. Inversiones La Estancia II S.A., whose ultimate controller is María del Carmen Izquierdo Menéndez, Tax ID
5.548.409-0, with a 99.99% share of the company’s capital. This company was taken over by Inversiones La
Estancia Ltda.
t. Cerro Colorado de Inversiones Ltda., whose ultimate
controllers with direct shares in the company’s capital are Gonzalo Izquierdo Menéndez, Tax ID 3.567.4845 (99.5%), and Luz María Irarrázaval Videla, Tax ID
5.310.548-3 (0.50%).
q. La Esperanza S.A., whose ultimate controller is Gracia Inés Izquierdo Menéndez, Tax ID 5.742.317-K, with a
99.99% share of the company’s capital.
Grupo Gianoli
n. Inversiones El Manzano II S.A., whose ultimate controllers are Diego Izquierdo Menéndez, Tax ID 3.932.428-8
and María Isabel Reyes, Tax ID 5.748.650-3, with 99%
and 1% shares of the company’s capital, respectively.
r. Inmobiliaria e Inversiones Santa Sofía Ltda., whose
ultimate controllers with direct shares in the company’s
capital are Matías Izquierdo Menéndez, Tax ID 3.674.2984 (26.97000%), María de la Luz Gonzalez del Valle, Tax ID
4.469.967-2 (5,65100%), María del Carmen Izquierdo Menéndez, Tax ID 5.548.409-0 (0.01123%), Jimena Izquierdo
González, Tax ID 10.184.748-9 (1.02067%), María Cecilia
a. Inversiones Green Ltda., whose ultimate indirect controller is Foundation G&D (Geneva, Switzerland) with
90% of the company’s capital.
b. Las Bardenas Chile S.A., whose ultimate indirect controller is the heir of Sergio Pedro Gianoli Gainza, Uruguayan
Tax ID 1.088.599-5, with 100% of the company’s capital.
9
Company Structure
PARENT
ENTEL CHILE S.A.
100.000%
ENTEL
INVERSIONES S.A.
HOLDING
99.990%
ENTEL
INTERNACIONAL BVI CORP.
0.010%
100.000%
99.999%
ENTEL PCS
TELECOMUNICACIONES S.A.
99.990%
SOCIEDAD DE
RADIOTELECOMUNICACIONES
INSTA BEEP LTDA.
0.001%
10.000%
ENTEL
CALL CENTER S.A.
EUSA WHOLESALE INC.
90.000%
99.900%
50.000%
0.100%
ENTEL SERVICIOS
DE CONTACT CENTER S.A.
8.580%
ENTEL SERVICIOS
TELEFÓNICOS S.A.
99.000%
1.000%
BUENAVENTURA S.A.
10.000%
ENTEL PERÚ S. A.
90.000%
53.433%
AMERICATEL PERÚ S. A.
46.567%
99.997%
SERVICIOS DE CALL CENTER
DEL PERÚ S.A.
0.003%
91.420%
0.010%
MICARRIER
TELECOMUNICACIONES S.A.
99.990%
0.25%
ENTEL SERVICIOS
EMPRESARIALES S.A.
99.75%
1.000%
ENTEL
TELEFONÍA LOCAL S.A.
99.000%
OPERATING COMPANIES
ENTEL
COMERCIAL S.A.
0.010%
99.999%
0.001%
TRANSAM
COMUNICACIONES S.A.
99.886%
0.114%
Companies in Chile
10
WILL S.A.
International Companies
Dividend Policy
The board’s intended dividend payments are always subject to
the results and investment requirements set out in the forecasts made regularly by the company.
The dividend policy, approved by the Board of Directors and
communicated at the Ordinary General Meeting of Shareholders on April 25, 2013, is detailed below.
The policies for determining the liquid distributable profit and
the handling of adjustments for the initial application of IFRS
for the 2014 financial year are maintained as follows:
Dividend Policy
a.As policy for determining the liquid distributable profit for
the financial year, it was agreed to consider the net effect,
taking into account positive and negative variations caused
by changes in the fair value of assets and liabilities.
In accordance with the regulations of the Chilean Securities
and Insurance Supervisor, the board of directors must approve
the company’s dividend policy for future years.
For 2014 and subsequent years the board provisionally intends to maintain the new dividend policy communicated at
the General Meeting of Ordinary Shareholders for 2013 based
on the distribution of up to 50% of distributable profits for the
year and, where applicable, the capitalization of part of the
profits accrued at the end of each period. It is proposed to pay
the resulting dividend on or before May 31 of the corresponding year. With respect to annual interim dividends, an interim
dividend based on the company’s performance during the first
three quarters of the year will be paid in the final quarter of
2014. This policy will be analyzed going forward with a view to
making it permanent in line with the return to a stable investment plan for organic growth.
In determining the percentage of profits and the dates on which
proposed final dividends will be paid, the company seeks to
ensure financial stability while adhering to the established distribution policy. Specific attention has been paid to safeguards
for debt, liquidity, and budget financing, and any possible covenants that may arise from public supply contracts and credit
agreements entered into by the company.
If the net effect is positive (a profit), this will be deducted
from the financial profit to calculate the liquid distributable
profit.
If the effect is negative (a loss), this will not be added to the
distributable liquid profit.
It is expressly stated that this policy applies to adjustments
for the purpose of derivative contracts. At the time of writing, the company has no recorded assets or liabilities subject to adjustment to market values under IFRS.
b.As policy for handling adjustments for the first-time adoption of IFRS, losses incurred for the first-time adoption of
IFRS will be managed in an equity account. As such, it has
been decided not to absorb them by decreasing paid-in capital.
However, a decision may be taken to absorb this balance by
allocating it against profits in future years.
It is also expressly stated that this policy was communicated to the Chilean Superintendency of Securities and Insurance in a timely manner and that it was covered at the 2013
meeting in line with the provisions of Circular No. 1945 of
the Superintendency.
11
The policy will continue to hold for future financial years in
the manner described above.
Investment
Policy
Dividend Payment Procedure
Upon the written request of any shareholder, dividends will
be deposited in the shareholder’s current or savings account on the date established for payment. To exercise this right,
shareholders must communicate the name of the bank, the
branch or office, and the number of an account in their name.
The request will be actioned within 24 hours of receipt of the
corresponding communication by the company and this payment method will prevail until such time as it receives written
instruction to the contrary.
Shareholders may also request the dividend to be paid via a
check made out in their name and dispatched by recorded
post. Any such request must be communicated at least 24
hours before the cut-off for the register.
The company will provide shareholders with forms, available
upon request, to allow them to choose one of the established
payment methods.
For shareholders that have not selected one of the aforementioned payment methods, dividends will be paid at a bank in
Chile’s Metropolitan Region, as determined by the company, or
at the address indicated in the notification referred to below.
Dividends that have not been collected within 60 days of the
payment date, will be available at the offices of the company
responsible for the shareholder register.
Shareholders wishing to collect their dividends from a commercial bank or the company’s designated offices must do so
in person or via a legally authorized representative with the
appropriate powers, as granted by public deed or a private instrument legalized by a public notary. For the latter, either the
original document or a duly legalized photocopy must be left
with the company.
The payment of dividends will be publicly communicated in a
timely manner in the national newspaper established at the
general shareholders meeting.
12
In terms of investments, the company aims to obtain an adequate return on its assets through the study, construction and
operation of telecommunications systems and information technology, complemented by the provision of a wide range of
related services both in Chile and abroad.
To comply with this objective, the company makes investments
in a wide range of technologies and platforms for the sale, provision and development of new services for customers, as well
as making investments to meet the growing demand for connectivity related to new services, technologies, markets and
user needs.
The company also undertakes projects to maintain a level of
technical and economic efficiency, and suitable levels of maintenance for its facilities, making financial optimal decisions to
allow the required evolution of infrastructure, networks, platforms and systems.
Consequently, the company seeks to ensure its investments
have a stable rate of return over time, in line with their risk
and technological obsolescence, and that this is at least equal
to the capital cost of their financing structure.
In 2014, in line with Entel’s investment and finance budgets,
annual investment in fixed assets not exceeding the debt ratio
permitted by the financing policy was authorized to finance various company projects both in Chile and abroad.
In line with the rules approved at the Ordinary General Meeting
of Shareholders, the Board of Directors must provide details of
specific investments to be made by the company in companies,
works, and studies. These values will primarily depend on the
development of programs that will materialize during the calendar year, and which will mature in this or subsequent periods.
The company will be authorized to make contributions to subsidiaries and affiliates within the scope of this policy.
To maximize yields from cash surpluses, the company will invest in financial assets and market securities in line with its
portfolio selection and diversification criteria. These criteria
will take into consideration factors such as liquidity, security
and profitability.
Finance Policy
The company’s finance policy is based on the following resources:
>>Own resources
>>Resources derived
from increases to capital stock by issuing and placing shares
>>Supplier credit
>>Loans from banks and financial institutions
>>Deferred customs duties
>>Issuing public and private bonds
>>Leasing and leaseback operations.
Distributable Profits
The consolidated comprehensive income statements for the
2014 financial year show a profit of CLP 56,470,502,427. To determine the liquid distributable profit used for calculating the
minimum compulsory and supplementary dividend, the company has established a policy of deducting profits originating
from the adjustment of assets and liabilities from income until
they are realized. As of December 31, 2014, CLP 2,354,417,873
should be deducted.
Consequently, the liquid distributable profit for the 2014 financial year is CLP 54,116,084,554. An interim dividend of CLP 80
per share, equivalent to a total of CLP 18,921,895,600 was
allocated against these profits, payable on December 11, 2014.
This dividend was agreed at the meeting of the company’s
Board of Directors on November 3, 2014 and represents
34.97% of the liquid distributable profits for the year.
Profits are not subject to any other deductions for the purposes of distribution.
The policy establishes a maximum level of debt based on the
higher of: (financial debt – cash) / (equity + non-controlling
shares) = 1.5 or (financial debt – cash) / annualized EBITDA =
3.0. In calculating both indicators, financial debt is calculated
discounting financial investments.
This criterion for the maximum level of debt is justified on the
grounds of allowing the development of new telecommunications projects both in Chile and abroad to permit increased
flexibility in financial management during the maturation and
consolidation of the profitability of new business activities.
It should be noted that the management of the company cannot agree to specific dividend restrictions with creditors or
make guarantees of any kind to third parties or other companies or enterprises other than subsidiaries or associates.
Additionally, all assets held by the company for operating national and international public service contracts held by Entel and
essential for the provision of these services are classified as essential to the company’s operations. However, these assets, may
be changed or replaced if they become technically or financially
obsolete. They may also be transferred in the event they are no
longer required for the provision of the services in question.
13
Dividend per Share
Stock Market Presence
Year
Nominal dividend (CLP)
1997
55.67
1998
20.00
1999
10.00
2000
40.00
2001
40.00
2002
43.38
2003
65.00
2004
90.00
2005
895.00
2006
290.00
2007
338.00
2008
443.00
2009
443.00
2010
450.00
2011
595.00
2012
555.00
2013
375.00
2014
230.00
The stock market presence of Entel S.A. in 2014 was 100%, calculated in line with General Regulation No. 327 of the Chilean
Superintendency of Securities and Insurance, dated January
17, 2012. This includes transactions carried out on the Santiago Stock Exchange, the Chilean Electronic Stock Exchange and
the Valparaíso Stock Exchange.
Summary of Transactions
Santiago Stock Exchange
Quantity
traded
Chilean Electronic Stock Exchange
Value
Average
traded
price
(CLP)
(CLP)
Quantity
Value
traded
traded (CLP)
Valparaíso Stock Exchange
Average
price
(CLP)
Quantity
Value
traded
traded (CLP)
Average
price
(CLP)
Q1 2012
30,083,534
284,508,198,543
9,457
2,651,155
24,850,937,610
9,374
4,680
44,523,846
9,514
Q2 2012
15,299,709
144,484,659,288
9,444
1,397,581
13,187,185,309
9,436
11,535
110,450,390
9,575
Q3 2012
12,285,955
116,697,441,625
9,498
441,723
4,201,744,447
9,512
7,196
69,718,926
9,689
Q4 2012
13,166,422
130,101,687,139
9,881
821,940
8,119,113,250
9,878
17,622
175,608,669
9,965
Q1 2013
22,313,687
223,601,236,415
10,021
1,131,360
11,288,033,869
9,977
49,010
486,620,644
9,929
Q2 2013
34,951,372
314,690,281,444
9,004
2,061,355
18,655,086,991
9,050
25,998
235,413,320
9,055
Q3 2013
16,607,457
142,090,532,000
8,556
1,398,543
11,879,159,875
8,494
11,076
98,038,162
8,851
Q4 2013
19,356,752
146,888,814,473
7,589
1,194,787
9,138,278,112
7,648
No transactions
Q1 2014
20,104,895
133,989,947,568
6,665
1,247,308
8,137,996,305
6,524
No transactions
Q2 2014
15,717,927
109,057,830,354
6,938
1,022,860
7,042,012,256
6,885
No transactions
Q3 2014
13,976,793
95,885,191,220
6,860
347,782
2,400,846,416
6,903
Q4 2014
14,173,579
91,975,352,811
6,489
430,492
2,770,234,982
6,435
228,038,082
1,933,971,172,880
8,481
14,146,886
121,670,629,422
8,601
Totals
14
120
828,000
6,900
No transactions
127,237
1,221,201,957
9,598
Share
Transactions
In line with the instructions in General Regulation No. 269 of
the Chilean Superintendency of Securities and Insurance, it is
expressly stated that in 2014, according to company records,
the following share transactions were executed by shareholders with relationships with the company.
Name or company name
Maria Magdalena Larraín Matte
y Cia Ltda
Relationship
Shared director
Transaction
Transaction
date
type
02/06/2014
Financial
investment
Method
Buy
No.
shares
Stock
market
Unit price
20,000
Value
Value
traded
traded
6,150
123,000,000
Financial Activities
During the year, the company actively participated in the national and international capital markets with the issue of longterm bonds. In July, Entel issued bonds on the local market
with a value of UF 7 million and a term of 21 years, which will
mature on May 30, 2035. The bond issue, which was subject
to high demand, largely from institutional investors, was one
of the largest ever on the Chilean market. The final rate of the
bond was UF + 3.50%. The main financial covenants for these
bonds are that interest coverage must be kept above a factor
of 2.5 and financial debt must be kept below a factor of 4.0.
The resources obtained from the bonds were used in their totality to refinance existing debts on the local market and for
the partial prepayment of an international bank loan signed
in September 2012 by Entel. The bond was classified as AA by
local ratings agencies.
cies and at foreign interest rates based on fixed rates in nominal values (CLP) or indexed inflation (Unidad de Fomento).
July also saw the company place a second 144A bond on the
international market, this time with a value of USD 800 million,
a tenor of 12 years and maturity due in 2026. This bond, which
was classified as investment-grade by three international rating agencies, achieved an annual rate of 4.75%. The resources
raised by the bond have mainly been used for the company’s
development plan in Peru.
The operations of Entel Perú are corporately funded by the parent company in Chile through inter-company loans at a market rate. At the end of the year, the debt of the subsidiary with
the parent company was USD 495 million.
The company has cross currency swap contracts in line with
the payment profile of the new international bond to provide
effective coverage of all debt denominated in foreign curren-
In addition to these contracts, the company has continued to
hold USD forward contracts to cover the totality of liabilities
in foreign currencies. These contracts completely hedge the
impacts of fluctuations in exchange rates on the company’s
balance sheets. At the end of the year, the total value of cross
currency swap operations was USD 1,625 million and the total
value of forward contracts was USD 509 million for Chilean
pesos and USD million 198 for Peruvian soles. Both foreign
currency cash surpluses and the aforementioned derivative
instruments are used to continuously compensate exchange
rate fluctuations in the liabilities of the company and its subsidiaries.
In 2014, the company used an average of USD 95 million in
short term credit lines with Chilean banks, which were mainly
used prior to bond issues in July before being fully paid off.
In addition to the use of the aforementioned funds, the company was involved in connectivity and telecommunications
15
projects that required it to provide major bank guarantees, the
closing balance of which was approximately UF 3,413,954.
The company currently has bond series and commercial papers filed in the Chilean Superintendency of Securities and
Insurance, which were partially used in the local bond placement in July.
In 2014, the company continued to manage the cash from
Entel Perú applying and adapting the existing policies used by
the parent company.
In terms of the investment of cash surplus, in Chile and Peru
the company prioritized investments focused on preserving
the principals invested based on a policy with strict requirements for diversification in terms of the value, institution and
terms. The securities used are issued by banking institutions
with top credit ratings or agreements based on documents issued by the Chilean Central Bank.
Risk Factors
Main risks factors for the telecom industry
Risk
Description
Impact
Management
Technological evolution
Evolution in telecommunications technology
mean the company must continuously review its
investment projects to ensure they are suitable
for its aim of meeting the connectivity needs
of markets. These changes occur both as a
result of changes in patterns of demand and the
development of new forms of connectivity.
The periods of obsolescence of investments in new
technology may be less than initially estimated
when the investment is made, meaning initial
estimates of expected profitability may not be met.
The risk of technological evolution is inherent to all
the markets in which Entel operates. A key element
of the company’s competitiveness is in remaining at
the cutting edge of the development of technology
while actively managing technological risk.
Regulatory
Telecommunications services in Chile are governed
by the General Telecommunications Act and its
supporting regulations. The legislation establishes
the general principle of free competition with
concessions awarded based on pre-established,
objective standards and without restrictions in terms
of quantity, service type and geographic location.
New sector regulations can create opportunities
and risks in the company’s commercial activities
and can also affect the rollout of infrastructure and
levels of competition in the market.
Actively participating in legislative and regulatory
debate in the sector via the relevant forums allows
Entel to anticipate changes, minimizing risk and
creating opportunities that allow it to maintain its
position in the various markets in which it is present.
16
Risks inherent to Entel’s activities
Risk
Description
Impact
Management
Exchange rates
The company’s liabilities are largely denominated
in foreign currency as a result of bank loans
and bonds issued on international debt markets.
Furthermore, a proportion of Entel’s suppliers
generate obligations for foreign currency
payments.
The company is also exposed to daily fluctuations
in the value of liabilities as a result of changes
in exchange rates, with the respective economic
impact on the financial statements.
To cover these volatilities, Entel has short- and
long-term contracts in foreign currency assets
(hedge derivatives) to protect against such
variations and guard against the risk of exchange
rate fluctuations.
Interest rate
In general, there is a positive correlation between
the company’s business activities, the economic
cycle and interest rates, which creates a natural
hedge for cash flows and financial expenditure.
However, in a certain period of time, this may lose it.
The potential fluctuation of finance costs is covered
by an interest rate hedge policy, which aims to
cover the company’s finance costs to allow the
adequate performance of the business over time
and ensure greater predictability and control of
financial expenditure.
To comply with the aforementioned objectives,
interest rate insurance may be taken out by closing
financial swap contracts (e.g. cross currency
swaps and forwards) to reduce potential variability
arising from interest on debts with variable
interest rates (e.g. Libor, Tab, Cámara).
To reduce this risk, Entel has policies to ensure the
diversification of risk based on pre-established
limits for the duration, percentage by institution,
and the risk classifications of the institutions and
instruments in which investments are made.
Credit
The credit risk from balances of accounts held with
banks, financial instruments, negotiable securities
and derivatives is managed by the finance
department in line with the policies for maintaining
the principal amount invested.
Situations can occurs in the market where one of
the counterparts , such as one in an investments,
financial derivatives and cash, may be unable to
fulfill their obligations.
Risks related with accounts receivable originating
from commercial business are covered by the
accounts eceivable impairment policies in place.
Entel can also anticipate the maturity of financial
obligations by searching for an option on the
market to provide funds in a timely manner in
advanced.
Liquidity
To minimize risk, Entel’s liquidity policy is
consistent with the adequate management of
assets and liabilities, allowing the company to
fully meet short- and medium-term payment
commitments.
The company may be affected by the failure to
comply with the debt service.
Customer billing is monitored on a daily basis
to detect any relevant deviations that may exist
with respect to the expected revenue flow. The
company actively manages accounts payable with
suppliers of consumables and services, allowing it
to meet all its obligations in a timely manner while
optimizing cash surpluses on a daily basis.
Forecasts of cash flows are made on a periodic
basis, together with the analysis of the company’s
balance sheet and the expectations of the capital
market to provide Entel with flexible alternatives
in the event of additional requirements for liquidity
and cash availability.
17
Comparative Performance of Shares
RELATIVE PERFORMANCE OF ENTEL SHARE PRICE VS IPSA (%) OVER THE LAST 24 MONTHS
110
100
90
80
70
60
50
M-13
J-13
S-13
D-13
M-14
J-14
S-14
D-14
ENTEL
IPSA
Comments from
shareholders and the Directors
Committee
II. Parent Company – Approval of 2013 Annual
Report, Dividend Distribution and Other Matters
During the last financial year, the company received no requests with comments or proposals related to the course of its
business to be included in this report.
Summary of
Material Events 2014
I. Parent Company – Invitation to General Meeting of Ordinary Shareholders
Letter No. 5, dated April 8, 2014, communicated that at the
board meeting on April 7, 2014, agreement was made to schedule the General Meeting of Ordinary Shareholders for April
29, 2014, to propose the distribution of the annual profits, with
a dividend of CLP 300 per share, from which CLP 150 per share
should be deducted for the interim dividend paid in December
2013.
18
Letter No. 7, dated April 29, 2014, communicated that at the
General Meeting of Ordinary Shareholders held on the same
date it was agreed to approve the Annual Report, Balance
Sheet and Statement of Income for the 2013 financial year and
pay a final dividend of CLP 300 per share, equivalent to 48.28%
of net profits for the year. The sum of CLP 150 was paid in
December 2013 as an interim dividend, leaving a dividend of
CLP 150 per share, payable on May 28, 2014.
The following were elected as company directors: Juan Hurtado Vicuña, Bernardo Matte Larraín, Luis Felipe Gazitúa Achondo, Richard Büchi Buc, Juan José Mac-Auliffe Granello, Juan
Bilbao Hormaeche, Andrés Echeverría Salas, Raúl Alcaíno
Lihn, and Alejandro Pérez Rodríguez. The first eight directors
were proposed by the controlling group and the last member
is independent. The remuneration of directors and the Directors Committee formed at the previous General Meeting of
Ordinary Shareholders were maintained. Similarly, the annual
budget for the committee was set, the appointment of KPMG
as external auditors was approved, the appointed and reserve
accounts inspectors were retained, Fitch Ratings and ICR (International Credit Rating) were appointed as the risk ratings
agencies, El Mercurio de Santiago was retained as the official
newspaper for the publication of company notices, related
operations were communicated, and the investment and finance policy was approved.
The resources raised will mainly be used for the early payment
of debt and to finance the company’s investment plan.
III. Parent Company – Other
VI. Parent Company – Distribution of profits
Letter No. 9, dated May 5, 2014, communicated that at the
board meeting held on the same date, Empresa Nacional de
Telecomunicaciones S.A. appointed Juan Hurtado Vicuña as
Chairman and Luis Felipe Gazitúa Achondo as Vice Chairman.
The Directors Committee, comprising Alejandro Pérez Rodríguez, Luis Felipe Gazitúa Achondo and Richard Büchi Buc, was
formed in line with Article 50 of the Corporations Act.
Letter No. 16, dated November 4, 2014, communicated as a
material event that the board of Empresa Nacional de Telecomunicaciones S.A. agreed to pay a provisional dividend of
CLP 80 per share, payable on December 11, 2014, and allocated against profits up to the third quarter of the year.
IV. Parent Company – Issuing of Securities on
International and National Markets
A letter dated July 10, 2014, communicated as a material event
that the company had placed bonds on the national market
for a total value of UF 7 million. The bonds, whose denomination corresponds to series M, were issued against the series
of bonds registered in the Register of Securities of the Chilean
Superintendency of Securities and Insurance (No. 675) on August 24, 2011, modified in line with the annotation dated June
30, 2014.
This makes the total payment for the provisional dividend
CLP 18,921,896, which represents 29.46% of profits as of the
third quarter of 2014.
VII. Parent Company – Management Changes
Letter No. 17, dated December 23, 2014, communicated as a
material event the resignation of Juan Bilbao Hormaeche from
the board of directors from this date. In line with the company
by-laws, the board will appoint his replacement at its next
meeting, and this replacement will assume his responsibilities
until the next General Meeting of Ordinary Shareholders, when
the Board of Directors will be re-elected.
The bonds have an annual coupon rate of 3.50%, payable every
six months from November 30, 2014, for a period of 21 years
until full maturity. The issue achieved a rate of 3.53% and was
classified as AA- by Fitch Ratings and AA+ by ICR. The funding
raised will be used to refinance liabilities. The placement did
not have significant effects on the Statements of Income.
V. Parent Company – Issuing of Securities on International and National Markets
Letter No. 14, dated July 17, 2014, communicated the issue of
bonds on the international market for a total value of USD 800
million as a material event. The bonds were issued in USD with
a term of 11.5 years and a rate of 4.78%.
The bonds were issued after an international roadshow that
took place in the cities of Los Angeles, Chicago, Boston and
New York in the United States, and London in the United Kingdom. The placement was classified as Baa2 by Moody’s, BBB
by S&P and BBB+ by Fitch Ratings.
19
Insurance
commitments
Entel has insurance contracts for all its companies to cover
events that might potentially affect its assets, equity and cash
flow by causing losses or reductions in value. In addition to
taking out insurance, a continuous risk-mitigation policy is implemented by investment in infrastructure and procedures to
support this mitigation.
In 2014, the company has focused on the use of corporate insurance tenders to take advantage of opportunities offered by
the insurance market for bulk volumes and the diversification
of risks in the regional market.
The contracts for the various insurance policies are based on
a previously defined policy that places special emphasis on
events with the potential to have a strong impact on the economic and financial position of the group and its relationships
with third parties, the latter as a result of accidental damage
by the activities of the various businesses.
In addition to this, the strategy for contracting insurance policies aims to cover, insofar as possible, risks that might cause
significant losses while excluding certain minor risks with negligible financial impact in order to balance low premium costs
with high coverage. The company is continuously seeking to
ensure the best conditions in terms of coverage and premium
costs in the insurance market. Over the last year, the limits of
certain types of coverage have increased in line with a more
demanding environment in terms of coverage and claims.
The main policies in Entel’s insurance program are:
a.Physical risks to assets and losses caused by stoppages –
Covers all risks to all assets owned by the group companies
and the loss of net income from potential stoppages caused
by accidents.
20
b.Public liability – Covers group companies against potential
pecuniary demands for damage caused to third parties or
their assets while carrying out business activities at their
facilities, in public areas or on third-party premises.
c.Directors and officers liability (D&O) – Protects directors
and executives of group companies from claims that may
be made against them by third parties to compensate for
losses of equity by the latter as a result of decisions made
by the former.
d.Professional public liability – Protects the company’s assets against claims from customers that may be affected by
errors or omissions in the provision of contracted services
covered by this policy. Insurance coverage with a second
period of validity in 2014.
e.International transport – Protects against any damage to
equipment and material imported by land, sea and air.
f. Credit – Protects against net losses or deteriorations in
Entel’s net equity as a result of third parties failing to meet
obligations in funds originating from credit sales.
g.Miscellaneous – Insurance for vehicles, mobile handsets,
travel, personal accidents, health and life insurance for
company staff, cabotage, etc.
h.Insurance program for contractors – Provides public liability and personal accident coverage for contractors and
subcontractors of group companies to protect the assets of
contractors and their workers. During the last year, and as
a result of fixed-mobile integration, the number of insured
contractors and the values insured has significantly increased with respect to 2011.
Suppliers
Entel’s main suppliers are Apple, Ericsson, Sony, Samsung, TCT
Mobile, Cisco Systems, Raylex Diginet, Sotraser and Huawei.
Full details of Entel’s purchasing policy can be found in its
Code of Ethics. The policy is based on ensuring relationships
with suppliers are governed by the principles of transparency,
integrity, honesty and mutual benefit. The choice of a supplier
is based on merit and ability, in line with the quality and cost of
a product or service.
Similarly, all potential suppliers have identical access to information to allow them to prepare quotes. All qualified companies that wish to initiate commercial relationships with Entel
are given equal opportunities. Tenders are analyzed and awarded based on objective procedures.
The activities of workers must avoid any situation that could
give rise to a conflict of interest or represent misconduct.
21
22
Declaration of Responsibility
Report Signatories and Sworn Declaration of Truth
In compliance with General Regulation No. 30, dated November 10, 1989, and General Regulation No. 283, dated November 5, 2010, both issued by the Chilean Superintendency of Securities and Insurance, this Report is signed by the
absolute majority of the members of the Board of Directors
and the CEO of Empresa Nacional de Telecomunicaciones
S.A., who declare under oath to be responsible for the truth
of the information provided in this Annual Report for 2014.
Juan José Hurtado Vicuña
Chairman
Tax ID: 5.715.251-6
Vice Chairman
Tax ID 6.069.087-1
Raúl Alcaíno Lihn
Director
Tax ID 6.067.858-8
Richard Büchi Buc
Director
Tax ID: 6.149.585-1
Director
Tax ID 9.669.081-9
Juan José Mac-Auliffe Granello
Director
Tax ID 5.543.624-K
Director
Tax ID 6.598.728-7
Director
Tax ID 5.169.389-2
Antonio Büchi Buc
CEO
Tax ID Tax ID 9.989.661-2
23
Annual Report 2014 -23
For Translation
Annual Purposes
Report 2014
Only
2.
CONSOL
IDATED
FINANCIAL
STATE
MENTS
26
27
_ Estados Financieros Consolidados
EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, 2014 and 2013
31.12.2014
31.12.2013
Note
ThCh$
ThCh$
Cash and cash equivalents
5
378,919,376
19,250,402
Other current financial assets
6
13,146,216
15,429,775
Other current non-financial assets
7
28,790,192
20,280,834
Trade and other receivables
8
300,591,179
326,740,821
Trade receivables due from related parties
9
492,035
521,772
Inventories
10
107,121,667
150,457,167
Current tax assets
11
52,380,158
35,604,158
881,440,823
568,284,929
ACTIVOS
CURRENT ASSETS
Total Current Assets
NON-CURRENT ASSETS
Other non-current financial assets
6
108,727,551
4,727,636
Other non-current non-financial assets
7
2,992,605
3,957,527
Non-current fees receivables
8
5,467,969
5,593,517
Intangible assets
12
136,924,227
133,035,056
Goodwill
13
47,193,868
47,095,064
Property, plant and equipment
14
1,614,978,515
1,334,268,920
Deferred tax assets
15
238,069,845
159,987,349
Total Non-Current Assets
2,154,354,580
1,688,665,069
Total Assets
3,035,795,403
2,256,949,998
The accompanying notes from 1 to 36 are an integral part of these Consolidated Financial Statements
28
LIABILITIES AND EQUITY
Note
31.12.2014
31.12.2013
ThCh$
ThCh$
CURRENT LIABILITIES
Other current financial liabilities
16
20,772,473
27,243,106
Trade and other payables
17
529,009,412
466,529,349
Other provisions
18
180,492
153,974
Current tax liabilities
11
12,866,595
1,346,165
Other current non-financial liabilities
19
TOTAL CURRENT LIABILITIES
23,557,801
19,997,766
586,386,773
515,270,360
NON-CURRENT LIABILITIES
Other non-current financial liabilities
16
1,434,258,466
813,151,112
Other long-term provisions
18
19,596,432
13,370,970
Deferred tax liabilities
15
19,989,741
19,859,855
Non-current provisions for employee benefits
20
10,226,233
7,862,489
Other non-current non-financial liabilities
19
8,992,896
6,350,100
1,493,063,768
860,594,526
Share capital
522,667,566
522,667,566
Retained earnings
435,949,779
415,404,634
(2,272,483)
(56,987,088)
956,344,862
881,085,112
TOTAL PASIVOS NO CORRIENTES
EQUITY
21
Other reserves
Equity attributable to owners of the parent
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
-
-
956,344,862
881,085,112
3,035,795,403
2,256,949,998
29
years ended December 31, 2014 and 2013
STATEMENT OF INCOME
Note
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
1,643,267,385
1,628,375,505
Revenue
23
Other income
23
18,802,748
13,120,675
Employee benefit expenses
20
(222,224,875)
(172,318,252)
(239,635,274)
(245,165,943)
(55,250,343)
(52,271,691)
(1,024,171,930)
(956,136,841)
5,981,586
2,433,477
126,769,297
218,036,930
Depreciation and amortization expenses
Impairment losses (reversals), Net
Other expenses
23
Other gains (losses)
Profit from operating activities
Finance income
23
10,818,705
1,946,886
Finance expenses
23
(55,252,785)
(20,838,218)
Foreign currency translation differences
25
(11,243,068)
(21,078,202)
Results from inflation-adjusted units
25
(22,635,632)
(1,150,441)
48,456,517
176,916,955
8,013,985
(29,951,701)
56,470,502
146,965,254
Profit before tax
Income tax (expenses)
15
Profit from continuing operations
Profit from discontinued operations
-
-
Profit for the period
56,470,502
146,965,254
Profit (loss) attributable to
56,470,502
146,965,254
-
-
56,470,502
146,965,254
238,75
621,36
-
-
238,75
621,36
Owners of the parent
Non-controlling interest
Earning per basic share
Earning per basic share from continuing operations
Earning per basic share from discontinued operations
Earning basic share
30
STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
56,470,502
146,965,254
(1,294,476)
(207,588)
Components of Other Comprehensive Income that will not be reclassified to profit or loss , Before tax
Actuarial gains (losses) for defined benefit plan
Components of Other Comprehensive Income that will be reclassified to profit or loss, Before tax
Foreign currency translation gain
24,763,213
6,455,972
Cash flow hedge gain (loss)
39,090,921
(3,647,492)
364,040
41,517
Income Tax related to Components of Other Comprehensive Income that will not be reclassified to profit or loss
Income tax related to defined benefit plans
Income Tax related to Components of Other Comprehensive Income that will be reclassified to profit or loss
Income tax related to cash flow hedges
(8,209,093)
68,654
Other Comprehensive Income
54,714,605
2,711,063
111,185,107
149,676,317
111,185,107
149,676,317
Comprehensive Income
Comprehensive Income Attributable to
Owners of the parent
Non-controlling interest
-
-
Comprehensive income
111,185,107
149,676,317
31
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Other reserve
Share
capital
Balance at January 1, 2014
Personnel
benefits
reserve
Translation
Hedging
Other
Retained
reserve
reserve
reserve
earnings
Equity attributable to owners of
the Parent
Non-controlling
Total
interest
equity
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
522,667,566
(166,071)
7,248,085
(3,304,221)
(60,764,881)
415,404,634
881,085,112
-
881,085,112
-
-
-
-
-
56,470,502
56,470,502
-
56,470,502
Other comprehensive income
-
(930,436)
24,763,213
30,881,828
-
-
54,714,605
-
54,714,605
-
-
-
-
-
-
111,185,107
-
111,185,107
Dividends
-
-
-
-
-
(45,789,428)
(45,789,428)
-
(45,789,428)
Increase (decrease) for
transfers and other changes
-
-
-
-
-
9,864,071
9,864,071
-
9,864,071
-
(930,436)
24,763,213
30,881,828
-
20,545,145
75,259,750
-
75,259,750
Balance at December 31, 2014
Total changes in equity
522,667,566
(1,096,507)
32,011,298
27,577,607
(60,764,881)
435,949,779
956,344,862
-
956,344,862
Balanace at January 1, 2013
522,667,566
-
792,113
274,617
(60,764,881)
351,037,106
814,006,521
-
814,006,521
-
-
-
-
-
146,965,254
146,965,254
-
146,965,254
Other comprehensive income
-
(166,071)
6,455,972
(3,578,838)
-
-
2,711,063
-
2,711,063
-
-
-
-
-
-
149,676,317
-
149,676,317
Dividends
-
-
-
-
-
(82,597,726)
(82,597,726)
-
(82,597,726)
Increase (decrease) for
transfers and other changes
-
-
-
-
-
-
-
-
-
Total changes in equity
Balance at December 31, 2013
-
(166,071)
6,455,972
(3,578,838)
-
64,367,528
67,078,591
-
67,078,591
522,667,566
(166,071)
7,248,085
(3,304,221)
(60,764,881)
415,404,634
881,085,112
-
881,085,112
32
CONSOLIDATED STATEMENTS OF CASH FLOWS
STATEMENT OF CASH FLOWS, DIRECT METHOD
Cash receipts from customers
Cash payments to suppliers
Cash payments to and on behalf of employees
Other cash payments for operating activities
Interest received for operating interests
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
1,941,498,368
1,836,844,136
(1,126,295,714)
(1,127,550,676)
(216,667,820)
(176,276,327)
(89,048,386)
(62,758,749)
1,508,798
2,208,272
Income tax paid
(38,853,279)
(72,144,614)
Net cash from operating activities
472,141,967
400,322,042
-
(194,459,679)
Cash flows used to obtain control of subsidiaries
Proceeds from the sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisitions of intangible assets
Dividends received
Interest received
10,135,787
9,409,047
(561,516,005)
(463,305,729)
(242,942)
(47,756,005)
1,367
1,382
4,507,459
1,917,873
Government grants
863,574
294,840
Other cash inflows
4,143,045
1,310,321
(542,107,715)
(692,587,950)
Proceeds from long-term borrowings
621,015,320
783,337,036
Proceeds from short-term borrowings
279,667,148
316,785,361
(421,515,178)
(727,020,585)
Net cash used in investing activities
Repayment of borrowings
Payment of finance lease liabilities
(2,837,334)
(2,790,107)
Dividends paid
(55,101,610)
(89,022,587)
Interest paid
(38,230,206)
(12,252,973)
Other cash inflows (outflows)
24,042,985
(19,522,563)
Net cash used in financing activities
407,041,125
249,513,582
Net increase (decrease) in cash and cash equivalents
337,075,377
(42,752,326)
22,593,597
8,125,838
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
19,250,402
53,876,890
378,919,376
19,250,402
33
_ Notes to the Consolidated Financial Statements
1. REPORTING ENTITY
a) Entel Group
Empresa Nacional de Telecomunicaciones S.A. (Taxpayer ID 92.580.000-7) is a company constituted and domiciled in Chile. The Company’s registered office is at
Avenida Costanera Sur 2760, 22nd floor, Las Condes, Santiago, Chile.
This Company is the Parent of the Entel Group companies included in these consolidated financial statements.
The Company is an openly-held corporation, with an indefinite term, registered with the Chilean Superintendence of Securities and Insurance (SVS) under number
162 and, therefore, it is subject to the regulations of this Superintendence. Its shares are registered in the Securities Record and traded in the Chilean market.
The controlling shareholder of Entel-Chile S.A. is Inversiones Altel Ltda. (Taxpayer ID 76.242.520-3), the owner of 54.76% of the Company’s current shares. 99.99%
of Altel Ltda. is controlled by Almendral S.A. (Taxpayer ID 94.270.000-8).
Almendral S.A. is controlled by a group of shareholders who signed a joint interest agreement on January 24, 2005. The agreement was signed by the groups Matte,
Fernández León, Hurtado Vicuña, Consorcio, Izquierdo and Gianoli.
The subsidiaries which financial statements are included in consolidation correspond to companies domiciled in Chile and other countries as detailed in note 3a).
The Chilean subsidiaries are closely-held corporations not subject to the regulations of the SVS; their shares are not traded, or registered with the Securities Record.
However, in line with legal requirements for public telecommunications concession holders, the subsidiaries Entel PCS Telecomunicaciones S.A., Micarrier Telecomunicaciones S.A., and Transam Telecomunicaciones S.A. are registered with the SVS under Nos. 33, 247, and 232, respectively. Companies registered in this special register are subject to the same regulations as public limited companies in terms of market information and disclosure, except for the requirement to provide
interim financial statements on a quarterly basis.
As of December 31, 2014, the Group’s personnel amounted to 11,826 employees and average headcount during the year was 12,395. As of December 31, 2013, the
Group’s personnel amounted to 11,068 employees and average read count during that year was 9,455.
b) Line of business
The Group companies are engaged in mobile telecommunication services, including voice, added value, data, broadband and mobile internet services basically
oriented to proposing integrated solutions, which encompass data networks, local telephony, Internet access, public long distance telephony, information technology services (data center, BPO and operating continuity), infrastructure, lease of networks and wholesale traffic businesses, as well as call center services for the
corporate market and Group companies.
These activities are mainly conducted in Chile. Activities abroad are performed by three companies operating in Peru engaged in the provision of wireline and call
center services. From September 2013, Entel Peru (Ex Nextel Peru) was included to the Group offering mobile telephone services.
34
2. BASIS OF PREPARATION
a) Statement of compliance
The consolidated financial statements as of December 31, 2014 and for the year then ended, have been prepared in conformity with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and instructions issued by the Chilean Superintendence of Securities and
Insurance (SVS) and were authorized for issue by the Board of Directors on January 28, 2015.
Should there be any discrepancies between IFRS and the instructions issued by the Chilean Superintendence of Securities and Insurance (SVS), the latter shall
prevail. As of December 31, 2014, the only instruction issued by the SVS that contravenes IFRS refers to the particular recognition of the effects of deferred taxes,
as established in Circular No.856 issued by the SVS on October 17, 2014.
Such Circular establishes a mandatory single-time exception to the framework for preparing and presenting financial information adopted, defined as International Financial Reporting Standards (IFRS). Such Circular provides instructions to the regulated entities to “account for those differences in deferred tax assets and
liabilities generated as direct effect of an increase in the corporate income tax rate introduced by Law No.20.780 in the related year against equity.” Consequently,
this result in a change in the framework for preparing and presenting financial information adopted prior to the issuance of such Circular, as International Financial
Reporting Standards (IFRS) require the full, explicit and unreserved adoption.
The Group’s consolidated financial statements as of December 31, 2013 and for the year then ended, have been prepared in accordance with International Financial
Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
At the date of issuance of these consolidated financial statements, the IASB had issued the following pronouncements, which application is mandatory for the annual
periods indicated below.
The above translation of the auditors’ report is provided as a free translation from the Spanish language original, which is the official and binding version. Such
translation has been made solely for the convenience of non-Spanish readers.
Accounting pronouncements effective starting from January 1, 2014:
Standards & Amendments
Mandatory application date
NEW IFRIC
IFRIC 21 - Levies
Guidance on when to recognise a liability for a levy
Annual periods beginning on January 1, 2014
AMENDMENTS TO IFRS
IAS 32 - Financial Instruments: Presentation
Requirements to Offset Financial Assets and Financial Liabilities
IAS 36 - Impairment of Assets
Recoverable Amount Disclosures for Non-Financial Assets
IAS 39 - Financial Instruments: Recognition and Measurement
Novation of Derivatives and Continuation of Hedge Accounting
IAS 27 - Separate Financial Statements,
IFRS 10 - Consolidated Financial Statements, and
IFRS 12 - Disclosure of Interests in Other Entities
These amendments are applicable to Investment Entities, providing an exception for the
accounting treatment and eliminating the consolidation requirement.
The application of the standards above has not had a significant effect on the amounts included in these consolidated financial statements; however, it could affect
the recording of future transactions or agreements.
35
Accounting pronouncements effective starting from January 1, 2015 and after:
Standards & Amendments
Mandatory application date
NEW IFRS
IFRS 9 - Financial Instruments
IFRS 14 - Regulatory Deferral Accounts
IFRS 15 - Revenue from Contracts with Customers
AMENDMENTS TO IFRS
IAS 19 - Employee Benefits
Amendments to the Treatment of Employee Contributions
IAS 16 - Property, Plant and Equipment; IAS 38 - Intangible Assets
Clarification of Acceptable Methods of Depreciation and Amortisation
Annual periods beginning on January 1,2016
IFRS 11 - Joint Arrangements
Accounting for Acquisition of an Interest in a Joint Operation
To date, the Company has not opted to early adopt any of these changes in standards. The Company believes these changes would not have any significant impact
on the Group’s consolidated financial statements in the initial mandatory application period.
b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material items:
>>Derivative financial instruments are measured at fair value
>>Interest-bearing borrowings are measured at amortized cost; and
>>Liabilities arising from post-employment defined benefit plans are measured at their present value considering actuarial variables.
c) Functional and Reporting Currency
The consolidated financial statements and accompanying notes are presented in thousands of Chilean pesos, which is the Group’s functional currency.
d) Use of Estimates and Judgments
In the preparation of the consolidated financial statements, the Company’s management uses certain estimates based on the best available information available
at each reporting date.. These estimates affect the valuation of certain assets, liabilities, profit or loss, and cash flows that would be significantly affected by new
events giving rise to changes in assumptions and other sources of uncertainty assumed through the present date.
The main estimates refer to:
>>Actuarial assumptions used for estimating severance indemnity payment liabilities;
>>Valuation of assets and goodwill generated from the acquisition of companies, which could affect the determination of impairment losses;
>>Useful lives of property, plant and equipment and intangible assets;
>>Assumptions made when determining the fair value of financial instruments;
36
>>Assumptions related to the generation of future taxable profits deductible from deferred tax assets;
>>Establishment of decommissioning liabilities.
e) Changes in accounting policies
The accounting policies set up below have been applied consistently to all periods presented in these consolidated financial statement.
3. SIGNIFICAN ACCOUNTING POLICIES
a) Basis of consolidation
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The consolidated financial statements include the financial statements of the parent and the entities controlled by the Group (its subsidiaries). An investor controls
an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power
over the investee; Thus, the principle of control sets out the following three elements of control:
>>power over the investee (that is, it has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the
investee’s returns);
>>exposure, or rights, to variable returns from involvement with the investee; and
>>the ability to use power over the investee to affect the amount of the investor’s returns.
Consolidation of a subsidiary shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee. Specifically, the revenues and expenses of a subsidiary acquired or sold during the year are included in the consolidated statements of comprehensive income from the
date in which the Company obtains control and up to the date in which control ceases.
When there is a loss of control, Entel derecognizes the assets and liabilities of the subsidiary, non-controlling interests and other equity components related to the
subsidiary. Any gain or loss resulting from the loss of control is recognized in profit or loss. If any investment is retained in the former subsidiary this is valued at
its fair value when control is lost. Subsequently that investment retained is accounted for as an investment recorded under the equity method or a financial asset
available for sale, depending on the level of influence retained
In preparing consolidated financial statements, an entity combines the financial statements of the parent and its subsidiaries line by line by adding together like
items of assets, liabilities, equity, income and expenses. All the Company’s direct and indirect subsidiaries are controlled by 100% and, accordingly, non-controlling
interest does not exist in the consolidated financial statements.
Intra-group balances, and income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
The carrying amount of the Parent’s investment in each subsidiary is offset against equity, after adjusting such carrying amount to fair value on the date in which
control over the investee is obtained. At that date, goodwill is recognized within intangible assets as described below whereas any gain resulting from the acquisition
of a business or negative goodwill is recognized in the statement of comprehensive income.
Assets and liabilities of consolidated foreign operations expressed in currencies other than the Chilean peso are translated into Chilean peso using the exchange
rate at the reporting date. Revenues and expenses of foreign operations are translated using the average exchange rate for the period. Foreign currency differences
resulting from the application of this method are classified in equity until the disposal of the investment.
37
The exemption allowed under IFRS 1 (First-Time Adoption of IFRS) for annulling exchange rate differences accumulated at the date of transition to IFRS was not adopted.
The subsidiaries included in consolidation correspond to companies domiciled both in Chile and abroad, detailed as follows:
Tax ID Number
Company
Country
Currency
Ownership percentage
12.31.2014
Direct
Indirect
12.31.2013
Total
Total
96806980-2
ENTEL PCS TELECOMUNICACIONES S.A.
CHILE
Ch$
99,999
0,001
100,000
100,000
76479460-5
ENTEL COMERCIAL S.A.
CHILE
Ch$
-
100,000
100,000
100,000
96561790-6
ENTEL INVERSIONES S.A.
CHILE
Ch$
99,990
0,010
100,000
100,000
96554040-7
ENTEL SERVICIOS TELEFONICOS S.A.
CHILE
Ch$
91,420
8,580
100,000
100,000
96563570-K
ENTEL CALL CENTER S.A.
CHILE
Ch$
90,000
10,000
100,000
100,000
96697410-9
ENTEL TELEFONIA LOCAL S.A.
CHILE
Ch$
99,000
1,000
100,000
100,000
96548490-6
MICARRIER TELECOMUNICACIONES S.A.
CHILE
Ch$
99,990
0,010
100,000
100,000
96553830-5
ENTEL CONTACT CENTER S.A. ( Ex Satel S.A.)
CHILE
Ch$
-
100,000
100,000
100,000
100,000
96672640-7
ENTEL SERVICIOS EMPRESARIALES S.A.
CHILE
Ch$
-
100,000
100,000
79637040-8
SOC.DE TELECOMUNICACIONES INSTABEEP LTDA
CHILE
Ch$
99,990
0,010
100,000
100,000
96652650-5
TRANSAM COMUNICACIÓN S.A.
CHILE
Ch$
-
100,000
100,000
100,000
100,000
96833480-8
WILL S.A.
CHILE
Ch$
-
100,000
100,000
0-E
AMERICATEL PERU S.A.
PERU
PEN
46,570
53,430
100,000
100,000
0-E
SERVICIOS DE CALL CENTER DEL PERÚ S.A.
PERU
PEN
0,004
99,996
100,000
100,000
PERU
PEN
90,000
10,000
100,000
100,000
USA
Ch$
-
100,000
100,000
100,000
ISLAS VIRG. BRITA.
Ch$
100,000
-
100,000
100,000
0-E
ENTEL DEL PERÚ S.A. (Ex Nextel del Perú S.A.)
0-E
EUSA WHOLESALE INC.
0-E
ENTEL INTERNACIONAL B.V.I. CORP.
Ch$= Chilean peso
EN= Peruvian nuevo sol
In September 2013, the Company Nextel del Peru S.A. was included in the consolidation of the Entel Group (see Note 12.1).
From September 2013, the Nextel acquisition involved the recognition of additional net inter-company revenue of ThCh$105,705,363 and a net loss of ThCh$79,057,597.
b) Foreign currency transactions and balances
Transactions in foreign currencies are translated to the functional currency of Group entities at the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.
The difference determined between the original and closing amount is recognized under foreign currency translation differences in the statement of income.
An exception to the above relates to assets and liabilities stated at fair value (mainly those arising from financial derivative contracts). The differences between
exchange rates at the reporting date and the fair value of such contracts are also recorded in profit or loss within Foreign currency translation differences, with the
exception of cash flow hedge contracts where differences are recognized in equity.
38
Assets and liabilities expressed in foreign currency or other translation units are translated as follows:
Exchange rate at the end of the period
31.12.2014
31.12.2013
$
$
US Dollar
US$
606,75
524,61
Euro
EUR
738,05
724,30
Unidad de Fomento
UF
24.627,10
23.309,56
Peruvian nuevo sol
PEN
202,93
187,49
c) Financial instruments
Financial assets
The Group classifies its financial assets under the following categories: fair value through profit or loss; loans and receivables. The classification depends on the
purpose for which the financial assets were acquired.
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or when it transfers the rights to receive the
contractual cash flows on the financial asset.
>>Financial assets at fair value through profit and loss
Financial asset at fair value through profit or loss are financial assets held for trading. The Group companies include under this category those derivatives that do
not meet the requirements for hedge accounting. Contracts that record an asset position at the reporting date are presented within other financial assets whereas
those with liability positions are recognized within other financial liabilities.
>>Loans and receivables
Loans and receivables are financial assets with fixed o determinable payments that are not quoted in an active market. Such assets are recognized initially at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective
interest method, less any impairment losses.
Trade receivables are recognized on the basis of the amounts recorded in the related invoices and the required adjustment is recorded in the event that there is
objective evidence of risk of non-compliance by the customer (impairment).
Current trade receivables are stated at their current value with no discount to present value. The Group has determined that the calculation of amortized cost does
not differ from the invoiced amount as there are no significant costs associated with the transactions.
>>Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and short-term, highly liquid investments which are subject to an insignificant risk of changes in value, with
original maturities of less than three months. In addition to cash balances and those held in bank current accounts, cash and cash equivalents also includes shortterm deposits; fixed income mutual fund deposits; and transactions with buyback and resale options with original maturities of three months or less. These assets
are recorded at their nominal value or amortized cost, depending on their nature, with changes through profit or loss. Recorded balances include interest and adjustments accrued at the end of the year.
Financial liabilities
The Group initially recognizes debt securities issued on the date that they are originated. All other financial liabilities (including liabilities designated at fair value
through profit or loss) are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
39
The Group classifies non-derivative financial liabilities under other financial liabilities. Such financial liabilities are recognized initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
Other financial liabilities include loans and borrowings, bank overdrafts, and trade and other payables.
Financial liabilities hedged by derivatives designated to manage the exposure to fluctuations in cash flows (cash flow derivatives used for hedging) are measured
at amortized cost.
Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives, if any, are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and
the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative,
and the combined instrument is not measured at fair value through profit or loss.
In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when:
>>at inception the hedge relationship is formally designated and documented;
>>the hedge is expected to be highly effective;
>>the effectiveness of the hedge can be reliably measured;
>>the hedge is highly effective throughout the financial reporting periods for which it was designated.
All derivatives are measured at fair value in accordance with IAS 39.
If a fair value hedge meets the conditions for hedge accounting, the following accounting treatment is applicable:
>>Cash flow hedges – When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated
with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the
derivative is recognized in other comprehensive income and presented in the hedging reserve in equity (cash flow hedge reserve). The amount accumulated in
equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss..
When hedges relate to risk management strategies but not necessarily meet the effectiveness and testing requirements required by accounting standards for the
application of hedge accounting, changes in the value of instruments are charged to profit or loss.
d) Inventories
Goods for sale are measured at the lower of weighted average cost and net realizable value depending on the purpose for which they are held.
Such a classification includes mobile phone handsets for customers. In this case, grants related to the transfer of handsets to customers are expensed in profit or
loss as cost of sale.
40
The main inventories are mobile handsets and accessories. The Group assesses, at each reporting date, the existence of obsolete inventories in order to estimate
the related write-off provisions. For this purpose, the Group considers the permanence of the different equipment in the warehouse based on their functions and
the prices of new models entering into the market.
e) Impairment
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had
a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
For estimating the impairment of receivables, the Group applies different percentages to different client classes based on the aging of past due receivables and
possible collection costs. Differences are also made for current receivables, renegotiated receivables and documented receivables.
The mentioned factors are used to perform the estimation of uncollectibility for billed services.
The Group does not consider the discounted values of loans and receivables to estimate their impairment because they mature in the short-term and, accordingly,
the difference between their current value and discounted value is not significant.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have
indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognized if
the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount of an asset is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets. The ceiling test to determine value-in-use is subject to the operating segment for goodwill impairment purposes.
Impairment losses are recognized in profit or loss. . In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date
for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount; however, an impairment loss in respect of goodwill is not reversed
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.
f) Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
The determination of cost considers the price of goods and services including unrecoverable taxes and customs duties, as well as site preparation and start-up
costs for it to be capable of operating and an estimate of the cost of its removal and dismantling.
Net interest on borrowings directly associated with the financing of construction work, accrued during the development period and up to the date in which the asset
is available for use are capitalized except for projects which development period is lower than six months.
41
g) Depreciation of property, plant and equipment
Depreciation is estimated using the straight-line method based on the estimated useful lives of the assets in conformity with technical studies. Such technical
studies include the annual verification of technologic and/or business events that make it advisable to amend such useful lives as well as the assets’ residual value
at the date of removal.
In addition, the Group applies procedures to evaluate any indication of asset impairment. In the event that there are assets which values exceed their market value
or ability to generate net income, the Group makes impairment adjustments which are charged to profit or loss.
Depreciation tables are highly disaggregated based on the characteristics of different assets in addition to the possibility of being treated on an individual basis.
Most significant average rates are detailed in Note 13, Property, plant and equipment.
h) Finance lease
Assets held by the Group under leases which transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases
For these purposes, the Group considers the transfer of the asset at the end of the agreement, the value of a possible purchase option, the portion of the economic
life of the asset covered by the term of the lease and the degree to which the current value of minimum lease agreement payments is equivalent to the asset fair
value. The leased asset is measured at an amount equivalent to the present value of lease payments and the amount payable to exercise the purchase option.
Leased assets are subject to depreciation under the general standards applicable to property, plant and equipment.
The ownership of leased assets is legally acquired through the exercise of the purchase option and, therefore, the Company cannot freely dispose of these assets
until it exercises the purchase option.
Assets under finance lease agreements are considered as sold for accounting purposes and derecognized from inventories. Gains and losses resulting from such
transactions are based on the ‘present value’ of lease payments receivable in relation to the acquisition or construction cost of assets sold..
i) Intangible assets
Intangible assets include rights of use on fiber optic cable capacities (IRUs), the cost of licenses and operating concessions, as well as other rights of use in favor
of the Group companies.
IRUs are amortized on a straight-line basis and expensed in profit or loss over the period of the related agreements.
Licenses and concessions are amortized over the lower of the estimated operating or awarding periods whereas rights of use are amortized over the life of the
agreement with a maximum period of 40 years.
Computer software cost is capitalized over a period of 4 years.
42
j) Goodwill
For goodwill that arises from the total or partial acquisition of companies, the Group uses the acquisition method establishing the fair value of the acquiree’s identified assets and liabilities recognizing the possible difference in the amount paid for the acquisition as goodwill. This amount is subject to impairment testing at
each year-end and any possible impairment losses are recognized.
k) Income tax and deferred taxes
The income tax expense is determined based on profit or loss for financial purposes. Temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes are recorded as non-current assets and liabilities, as applicable. Such values are
recognized at current value with no discount to their present value regardless of the estimated term of recovery. Deferred tax assets and liabilities are recognized
using the tax rates enacted when these are expected to be realized or settled.
On September 29, 2014, the Tax Reform Law was enacted, which, among other aspects, defines the by default tax system applicable to the Company, the corporate
income tax rate that will be gradually applied to companies between 2014 and 2018 and allows that companies may opt for one of two tax systems established
therein: the attributed income system or the partially-integrated system, which results in entities being subject to different tax rates starting from 2017.
The Attributed income system is applicable to individual entrepreneurs, single-owner limited liability companies, communities and partnerships when formed
exclusively by natural persons domiciled or residents in Chile, and the Partially-Integrated regime is applicable to the remaining taxpayers, such as openly and
closely-held shareholders’ corporations, joint stock companies or partnerships whose owners are not solely natural persons domiciled or residents in Chile. The by
default tax system applicable to the Company starting from January 1, 2017 is the partially-integrated system.
Likewise, the Company may elect to change their tax system to use a system other than the default system within the last three months of the 2016 calendar year,
upon approval by the shareholders at an Extraordinary Shareholders’ Meeting with a quorum of at least two thirds of voting-right shares issued, and it will become
effective through submission of the declaration signed by the Company, and the minute, drafted as public deed, submitted by the Company. The Company shall be
subject to the tax system that was assigned to it, during at least five consecutive business years. After this period it will be able to change the tax system, and should
be subject to such new system for at least five consecutive years.
Deferred taxes are measured using tax rates that are expected to be applied to temporary differences in the period in which they reverse using tax rates effective
at the reporting date, as follows:
Year
Partially-Integrated
2014
21.0%
2015
22.5%
2016
24.0%
2017
25.5%
2018
27.0%
l) Employee benefits
Defined benefits plan (post-employment benefits)
Post employment benefits include severance payments to which employees with indefinite employment contract with Entel Chile S.A who are members of Corporación Mutual are entitled when they achieve 8 years of continuous service. These obligations are measured at their present value discounted using long-term interest
rates and actuarial assumptions regarding employee turnover, life expectancy and salary and wage forecasts of the potential beneficiaries.
43
To determine the net amount of the liability to be recognized, the Group deducts the fair value of balances accumulated by employees based on the contributions
they have to make in certain Funds under agreements currently in force.
Variations in the obligation related to accruals associated with increases in the number of periods or increases or decreases in the number of employees, gains
or losses arising from actuarial effects are charged to payroll expenses, whereas those related to the accrual of embedded interest, are charged to profit or loss.
Termination benefits
Termination benefits are recognized as an expense when the Group is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan
to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for
the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee, and the obligation can be estimated reliably.
The cost of employee vacations is recognized in the year in which vacation days accrue regardless of the year in which employees use them.
m) Revenue
Revenue is recognized on the basis of accrual method, when the Group becomes entitled to receive a consideration. For these purposes, the Group considers the time
of delivery or reception of goods or rendering of services regardless of the time when the related cash flows are received (prepaid, simultaneous or at a given term).
The Group has the following specific policies for revenue:
Aggregated offers
This caption identifies the components of commercial packages offered determining the characteristics of each package.
Accordingly, revenue from the package is allocated to each component by applying the relevant individual revenue recognition standards.
Package sales that cannot be disaggregated are treated as a single transaction. Package sales cannot be disaggregated when their commercial effect cannot be
understood without reference to the whole set of transactions.
The most significant aggregated offer relates to the recruitment of mobile telephone service customers under the prepayment methodology. This offer includes the
equipment, a credit chargeable to services and the expectation for future services. Only those cash flows which reception is certain are considered for recognition
by disaggregating as service the average amount of the value that can be allocated to telephone services as these are used by customers.
In the event that solely some elements can be assigned a value reliably, the residual value is assigned to the remaining components.
The value assigned to a certain component will be limited to the sale price not subject to the delivery of other items.
44
Amounts received in relation to future services are recognized as a liability for advances received from customers which are subsequently reclassified to profit or
loss when the related services are used. Main cash flows for this concept correspond to amounts related to services included in prepaid mobile telephone service
offers as well as the sale of cards or subsequent electronic recharges.
Habilitation costs charged to post payment customers under contracts of loan and restitution of equipment are recognized in profit or loss in the same period when
the delivery of the related equipment is also recognized in profit or loss.
Sale of handsets
In conformity with the general standard, revenue is recognized when handsets are delivered to customers.
In the event that the sale includes a supplementary activity (installation, set-up, start-up, etc.) such sale is recognized upon approval by the customer.
Revenue from handsets delivered individually which technically or contractually can be used solely for services provided by the Company, is deferred and recognized over the expected life of each agreement.
No revenue is recognized for equipment delivered without transference of ownership (bailment, loan, lease, etc.). Handsets under this condition are recorded as
operating assets and, accordingly, they are subject to the related depreciation.
Revenue for activation charges
This revenue is deferred and recognized as such over the shorter of the life of the agreement or expected customer retention period.
The customer retention period is estimated based on the historical experience, churn rates or the knowledge of market behavior.
Connections with direct execution cost equal to or higher than the charge made to the customer are excluded from this procedure. In this case, revenue from activation
charges is recognized as such at the time of providing connection services to the customer in order to match income and expenses.
Connection costs include installation and management of third party orders, distributor fees and SIM card cost.
The general procedure also excludes connections representing independent, non-cancellable transactions not subject to the compulsory provision of other goods or services.
Customer Loyalty Programs
Provision of future benefits based on service use levels or current or past purchases. Revenue received is allocated based on fair values among services already
rendered and services to be provided in the future; revenue allocated to the latter is treated as unearned income for future sales. Simultaneously, the Company
accrues a provision for marginal costs associated with services or goods to be delivered fully or partially for free.
This procedure excludes isolated campaigns intended to introduce new products or re-launch other products as long as such campaigns last for less than three
months and do not represent more than 1% of sales for the last 12 months.
These programs include credits for calls, product discounts, benefits for goal compliance and accumulation of exchangeable points for products, own or third party services.
In the cases where benefit prescription or defeasance clauses are exercised, the respective unused balances are transferred to revenue.
45
These procedures are only applied if it is possible to make reliable estimates of benefits to be obtained by customers.
Sale Discounts
Revenue is stated net of discounts granted to customers.
Third Party Sales
In the cases where the Company acts as principal, agent or broker-dealer for sales of goods or services produced by other agents, revenue is recorded net; i.e.,
recording only the margin resulting from rendering the services; i.e., the commission or fee, or share of profit received.
To establish the condition to act as principal, the Group considers whether the product is explicitly sold on behalf of the supplier, whether it assumes the risks related
to the product, the responsibility over it and is in charge of fixing the sale price.
Prepaid Mobile Services
Revenue from sales of prepaid mobile services is recognized in profit or loss in the month when users make use of the services or when such services expire, if earlier.
Rendering of services in progress at the reporting date
Service rendering for more than one accounting period is recognized as revenue under the percentage of completion method at each reporting date. This percentage is determined based on the proportional of inputs used compared with budget.
n) Finance costs
Initial expenses related to fees, advisory services and taxes for borrowings are treated using the amortized cost method. Under this method, these expenses become
a part of the effective interest rate and, accordingly, they are amortized using such rate.
o) Provisions
The Group recognizes liabilities for all legal obligations in favor of third parties arising from transactions conducted or future events for which it is probable that an
outflow of economic benefits will be required to settle the obligation.
Provisions are recognized when the amount of the obligation can be reliably estimated based on the risks identified and the best estimates. The amount of provisions is discounted when the effect of the time value of money is deemed to be material.
p) Dividends
Dividends payable to third parties are reported as a change in net equity in the period in which the obligation for their distribution arises either because of being
declared at the Shareholders’ Meeting or being related to a legal obligation for minimum dividends.
q) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO to
make decisions about resources to be allocated to the segment and assess its performance.
Segment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
46
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets.
r) Government grants
Government grants intended to finance investments are recorded as lower acquisition or construction cost of the related assets.
s) Interconnection revenue and costs.
Amounts accrued in favor or against the Group’s companies are recognized on the basis of existing agreements and traffic measurements exchanged with other
domestic and international operators.
4. FINANCIAL ASSETS AND LIABILITIES
a) Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair
values have been determined for measurement and/or disclosure purposes based on the following methods.
Derivative Financial Instruments.
The fair value of a derivative contract that is not quoted in an active market is obtained from the difference between the cash flows related to the rights and obligations resulting from the contract discounted at the applicable market interest rate at the measurement date (Level 2 in the fair value hierarchy).
For currency forward contracts, fair value corresponds to the difference between the amount of the foreign currency to be acquired based on the contract, discounted using the exchange rate for the US dollar for the remaining period and expressed in Chilean pesos at the reporting date, less the debt in Chilean pesos agreed
in the contract discounted using the exchange rate for the Chilean peso for the remaining contract period.
As there no rates for all maturity dates but for some specific dates, the applicable rate is obtained by interpolating the closest points to the applicable maturity date.
This procedure is applied to rates in UF, Ch$, USD and Euro.
In the case of contracts to hedge against fluctuations in exchange and interest rates, the fair value corresponds to the difference in discounted cash flows of each
contract component, including the nominal amount.
Rates used to discount the local currency as well as the US dollars are risk free and zero-coupon rates. In the case of rates in Chilean pesos, the rate used to discount is obtained from investment instruments in nominal currency BCP and in the case of UF, from the BCU issued by the Central Bank. Rates in USD and Euro are
estimated based on rates for deposits and interest rates futures.
Non-derivative financial liabilities
For disclosure purposes, fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at
the reporting date. For finance leases, the market interest rate is determined by reference to similar leases.
In the case of current trading assets and liabilities, the fair value is estimated to be equal to their current value as they correspond to short-term cash flows.
b) Fair value hierarchy
In conformity with the methods and techniques used to determine fair values, the following hierarchies are defined:
47
>>Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
>>Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
>>Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The table below shows the changes in the fair value of net liabilities from derivatives:
31.12.2014
31.12.2013
Level 2
Level 2
ThCh$
ThCh$
(9,690,990)
(42,883,619)
107,087,291
17,755,568
39,090,921
(3,647,492)
Contract settlements during the period
(22,183,042)
19,084,553
Change in the Fair Value Measurement
123,995,170
33,192,629
Closing Balance for Derivative Contracts, Assets (Liabilities)
114,304,180
(9,690,990)
Net Opening Balance for Derivative Contracts, Assets (Liabilities)
Gains (losses) recognized in profit or loss
Gains (losses) recognized in equity
c) Categories of financial assets and liabilities
The table below shows the carrying amounts for the different categories of financial assets and liabilities compared to their fair values.
At fair value
December 31, 2014, ThCh$
Note
Assets
Liabilities
Currency or
Total
Through profit
Hedge
at amortized
at amortized
inflation
carrying
Total
fair
or loss
derivatives
cost
cost
adjusted unit
amount
value
-
-
345,376,916
-
CLP/USD/PEN
345,376,916
345,376,916
-
-
3,321,896
-
UF
3,321,896
3,608,370
15,259,823
102,570,478
-
-
USD
117,830,301
117,830,301
Assets
5
Other Financial Assets
6
Finance lease assets
Derivatives
-
-
721,570
-
CLP
721,570
721,570
Other
8
-
-
300,591,179
-
CLP/USD/PEN
300,591,179
300,591,179
9
-
-
492,035
-
CLP
492,035
492,035
15,259,823
102,570,478
650,503,596
768,333,897
768,620,371
Total assets
Liabilities
Other Financial Liabilities
16
Interest bearing borrowings
-
-
-
181,784,473
181,784,473
183,787,219
Liabilities with bond holders
-
-
-
1,264,985,513
1,264,985,513
1,288,249,604
5,057,525
Finance lease liabilities
Derivatives
17
Total liabilities
48
-
-
-
4,734,832
4,734,832
614,463
2,911,658
-
-
3,526,121
3,526,121
-
-
-
529,009,412
529,009,412
529,009,412
614,463
2,911,658
1,980,514,230
1,984,040,351
2,009,629,881
At fair value
December 31, 2013, ThCh$
Note
Assets
Liabilities
Currency or
Total
Through profit
Hedge
at amortized
at amortized
inflation
carrying
Total
fair
or loss
derivatives
cost
cost
adjusted unit
amount
value
-
-
9,804,381
-
CLP/USD/PEN
9,804,381
9,804,381
-
-
3,831,018
-
UF
3,831,018
4,259,797
14,491,283
1,155,489
-
-
USD
15,646,772
15,646,772
-
-
679,621
-
CLP
679,621
679,621
326,740,821
Assets
5
Other Financial Assets
6
Derivatives
Other
8
-
-
326,740,821
-
CLP/USD/PEN
326,740,821
9
-
-
521,772
-
CLP
521,772
521,772
14,491,283
1,155,489
341,577,613
357,224,385
357,653,164
-
-
-
287,713,681
287,713,681
291,581,399
-
-
-
519,944,070
519,944,070
515,116,993
-
-
-
7,398,705
7,398,705
7,772,759
18,747,030
6,590,732
-
-
25,337,762
25,337,762
-
-
-
18,747,030
6,590,732
Total assets
Liabilities
Other Financial Liabilities
16
Derivatives
17
Total liabilities
466,529,349
466,529,349
466,529,349
1,281,585,805
1,306,923,567
1,306,338,262
5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are composed as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
95,048
118,129
Cash in bank
33,248,642
9,252,008
Time deposits
325,375,233
318,867
6,000,551
1,875,185
14,001,132
7,610,329
Cash on hand
Fixed income mutual funds
Instruments issues by the Chilean Central Bank
Other cash and cash equivalents
Total
198,770
75,884
378,919,376
19,250,402
Total per currency
Ch$
261,126,853
14,795,996
US$
115,504,582
2,993,931
PEN
2,280,631
1,453,099
EUR
7,310
7,376
378,919,376
19,250,402
Total
Cash in banks include balances in current accounts denominated in U.S. dollars of ThCh1,087,582 with JP Morgan Bank and ThCh$24,905,479 with BCI Bank.
49
At December 31, 2013 and 2012 time deposits with original maturities of less than three months recognized at amortized cost are as follows:
Bank
Currency
Investment
Maturity
date
date
Days
Amount
Accrued
Accrued
Total
ThCh$
days
interest
12.31.2014
ThCh$
ThCh$
Banco Santander
USD
24-11-2014
23-02-2015
91
45,506,250
37
25,724
45,531,974
Banco Santander
USD
10-12-2014
05-01-2015
26
30,337,500
21
7,433
30,344,933
Banco Santander
USD
10-12-2014
09-02-2015
61
12,135,000
21
3,539
12,138,539
Banco CorpBanca
CLP
22-12-2014
18-02-2015
58
36,733,470
9
36,366
36,769,836
Banco CorpBanca
CLP
23-12-2014
27-02-2015
66
12,300,000
8
10,496
12,310,496
Banco CorpBanca
CLP
03-12-2014
13-02-2015
72
12,265,000
28
36,631
12,301,631
Banco CorpBanca
CLP
21-11-2014
09-01-2015
49
12,146,000
40
53,442
12,199,442
Banco de Chile
CLP
12-11-2014
09-01-2015
58
12,000,000
49
59,780
12,059,780
Banco de Chile
CLP
21-11-2014
16-01-2015
56
8,595,000
40
34,380
8,629,380
Banco de Chile
CLP
28-11-2014
23-01-2015
56
12,000,000
33
40,260
12,040,260
Banco de Chile
CLP
28-11-2014
30-01-2015
63
11,867,000
33
39,814
11,906,814
Banco de Chile
CLP
09-12-2014
20-01-2015
42
8,638,000
22
19,004
8,657,004
Banco de Chile
CLP
16-12-2014
30-01-2015
45
12,300,000
15
18,450
12,318,450
Banco de Chile
CLP
19-12-2014
27-02-2015
70
8,311,000
12
9,974
8,320,974
Banco de Chile
CLP
30-12-2014
06-03-2015
66
12,240,000
1
1,224
12,241,224
BCI
CLP
14-11-2014
13-01-2015
60
9,188,000
47
41,744
9,229,744
BCI
CLP
02-12-2014
06-02-2015
66
8,108,000
29
23,513
8,131,513
BCI
CLP
18-12-2014
30-01-2015
43
12,000,000
13
15,080
12,015,080
HSBC
CLP
04-12-2014
20-02-2015
78
8,719,000
27
21,187
8,740,187
Banco Security
CLP
24-12-2014
20-02-2015
58
10,000,000
7
6,767
10,006,767
Banco Security
CLP
24-12-2014
06-03-2015
72
10,355,000
7
7,007
10,362,007
Banco Itaú
CLP
12-12-2014
16-01-2015
35
11,655,000
19
20,299
11,675,299
BBVA
CLP
30-12-2014
13-03-2015
73
6,601,000
1
572
6,601,572
Scotiabank Perú
PEN
23-12-2014
05-01-2015
13
30,440
8
21
30,461
Banco de Credito del Perú
PEN
30-12-2014
08-01-2015
9
101,465
1
11
101,476
PEN
30-12-2014
12-01-2015
13
142,052
1
15
142,067
PEN
30-12-2014
05-01-2015
6
202,930
1
22
202,952
Scotiabank Perú
PEN
30-12-2014
05-01-2015
6
20,293
1
2
20,295
Scotiabank Perú
PEN
30-12-2014
07-01-2015
8
182,637
1
16
182,653
Interbank
PEN
23-12-2014
05-01-2015
13
81,172
8
70
81,242
Interbank
PEN
30-12-2014
12-01-2015
13
81,172
1
9
81,181
532,852
325,375,233
Total
324,842,381
Bank
Currency
Investment
Maturity
date
date
Days
Amount
Accrued
Accrued
Total
ThCh$
days
interest
12.31.2014
ThCh$
ThCh$
112,484
4
40
112,524
PEN
27-12-2013
06-01-2014
10
PEN
27-12-2013
07-01-2014
11
74,996
4
37
75,033
PEN
30-12-2013
10-01-2014
11
131,243
1
12
131,255
PEN
31-12-2013
05-01-2014
5
55
-
Total
318,778
50
-
55
89
318,867
In addition, at December 31, 2014, the Group records fixed income mutual funds with Banco Itaú for ThCh$6,000,551 which were invested on December 30, 2014 and
mature on January 2, 2015. At December 31, 2013 these are placements with Scotia Fondos Mutuos of ThCh$1,875,185 made on December 30, 2013 and redeemed
on January 2, 2014.
Financial investments on instruments issued by the Central Bank correspond to financial investments related to balances receivable for sale commitments for
financial instruments and are recorded at amortized cost. They are detailed as follows:
Al 31.12.2014
Code
Dates
Investment value
Rate for
Final value
ThCh$
the period
M$
Ch$
7,000,000
0.21%
7.001.925
AGREEMENT
Ch$
7,000,000
0.21%
7.001.470
AGREEMENT
Counterparty
Currency
02-01-2015
Banco BCI
02-01-2015
Banco Itaú
Issuance
Maturity
CRV
30-12-2014
CRV
30-12-2014
Totales
14,000,000
Al 31.12.2013
Code
Dates
Issuance
Maturity
Counterparty
Currency
Instrument
14.003.395
Investment value
Rate for
Final value
ThCh$
the period
M$
Carrying
amount ThCh$
7,000,642
7,000,490
14,001,132
Instrument
Carrying
amount ThCh$
CRV
30-12-2013
02-01-2014 Banco Santander
Ch$
3,801,000
0.35%
3,802,330
AGREEMENT
3,801,443
CRV
30-12-2013
02-01-2014
Ch$
3,808,416
0.37%
3,809,825
AGREEMENT
3,808,886
Totales
BBVA. C. Bolsa
7,609,416
7,612,155
7,610,329
In conformity with working capital management policies, all deposits in the financial market have maturities not exceeding 90 days and have been entered into with
widely known high rated banks and financial institutions, mainly in Chile.
The carrying amount of time deposits, fixed income mutual funds and instruments issued by the Chilean Central Bank for both periods does not significantly differ
from their fair values.
6. OTHER FINANCIAL ASSETS
Other financial assets are comprised as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
10,146,491
14,491,283
2,008,186
-
Current assets
Derivatives - Not designated as hedges
Derivates - Designed as heldges
Subtotal
991,539
938,492
13,146,216
15,429,775
100,562,292
1,155,489
Non-current asets
Derivates - Designed as heldges
5,113,332
-
2,330,357
2,892,526
Term deposits
721,570
679,621
Subtotal
108,727,551
4,727,636
Total other financial assets
121,873,767
20,157,411
51
Derivatives include all contracts with balances in favor of Group companies. Those with balances against Group companies are recorded within Other financial
liabilities (Note 16).
Finance lease assets relate to balances for an agreement in force with Telmex S.A. for the value of principal installments receivable with maturity over one year for
the long-term lease of telecommunication infrastructure.
The agreement consider 19 equal annual installments of UF 40,262.12 each, the last expiring on January 10, 2017 and a final installment representing the purchase
option of UF 30,196.59 expiring on January 10, 2018.
This amount is presented net of unaccrued interest, which was determined based on the annual interest rate embedded in the contract of 8.7% per annum.
The schedule of maturity dates is as follows (in thousands of Chilean pesos):
Minimum lease payments
31.12.2014
31.12.2013
Gross
Interest
Present value
Gross
Interest
From 1 to 90 days
1,194,280
(202,741)
991,539
1,190,142
(251,650)
938,492
From 1 to 2 years
991,539
(202,741)
788,798
938,492
(251,650)
686,842
From 2 to 3 years
991,539
(134,115)
857,424
938,492
(191,894)
746,598
From 3 to 4 years
743,654
(59,519)
684,135
938,492
(126,940)
811,552
From 4 to 5 years
-
-
-
703,869
(56,335)
647,534
3,921,012
(599,116)
3,321,896
4,709,487
(878,469)
3,831,018
Total
Present value
7. OTHER NON-FINANCIAL ASSETS
Other non-financial assets include mainly prepaid expenses as follows:.
OTROS ACTIVOS NO FINANCIEROS
Current
Non-current
12.31.2014
12.31.2013
12.31.2014
12.31.2013
ThCh$
ThCh$
ThCh$
ThCh$
Prepaid expenses
Leases (land, buildings)
17,371901
13756,088
1,005,659
1,479,507
Maintenance, Support
4,488,097
3,202,143
-
-
Lease of capacity
1,169,103
750,452
1,978,212
2,468,546
136,884
947,229
-
-
Insurance
2,036,337
256,828
-
-
Other services
1.725,226
434,535
210
210
-
933,559
-
-
Other
1,862,644
-
8,524
9,264
Total
28,790,192
20,280,834
2,992,605
3,957,527
Advertising
Deferred cost for customers installations
52
8. TRADE AND OTHER RECEIVABLES
Trade and other receivables are comprised as follows:
31,12,2014
31,12,2013
ThCh$
ThCh$
Trade and other receivables, Net
Trade receivables, Net, Current
288,948,374
306,004,580
Receivables from personnel Net, Current
5,986,736
6,673,190
Other receivables, Net, Current
5,656,069
14,063,051
Receivables from personnel Net, Non Current
1,160,891
3,503,221
Other receivables, Net, Non Current
4,307,078
2,090,296
306,059,148
332,334,338
403,968,161
416,022,096
Total
Trade and other receivables, Gross
Trade receivables, Gross, Current
Receivables from personnel Gross, Current
5,986,736
6,673,190
Other receivables, Gross, Current
5,724,892
14,127,699
Receivables from personnel Gross, Non Current
1,160,891
3,503,221
Other receivables, Gross, Non Current
4,307,078
2,090,296
421,147,758
442,416,502
Total
These balances include amounts with maturities over one year (non-current), which, at net level amount to ThCh$5,467,969 and ThCh$5,593,517 for each period
and are included within rights receivable in non-current assets.
Trade and other receivables do not include securitized items.
Trade receivables are stated net of provisions for impairment (uncollectibility) of ThCh$115,019,787 and ThCh$110,017,516, at December 31, 2014 and 2013, respectively. Gross amounts are ThCh$403,968,161 and ThCh$416,022,096, and are comprised as follows:
31,12,2014
Portfolio structure
Current
Non-renegotiated porfolio
Renegotiated porfolio
Total Gross portfolios
No,of customers
Gross balances ThCh$
No,of customers
ThCh$
1,542,898
220,878,680
9,063
9,473,138
230,351,818
1 - 30 days
492,354
37,184,160
1,239
115,704
37,299,864
31 - 60 days
180,465
13,768,254
1,027
137,558
13,905,812
61 - 90 days
144,336
9,791,814
1,007
139,352
9,931,166
91 - 120 days
177,290
11,254,300
825
136,404
11,390,704
5,376,731
121 - 150 days
117,273
5,288,825
754
87,906
151 - 180 days
102,095
5,048,762
791
95,964
5,144,726
181 - 210 days
116,089
4,703,312
782
123,216
4,826,528
5,450,752
211 - 250 days
134,578
5,308,755
976
141,997
250+ days
829,652
71,572,518
19,661
8,717,542
80,290,060
3,837,030
384,799,380
36,125
19,168,781
403,968,161
Total
53
31,12,2013
Portfolio structure
Non-renegotiated porfolio
Renegotiated porfolio
Total Gross portfolios
No,of customers
No,of customers
ThCh$
1,354,953
237,743,022
11,304
11,850,226
249,593,248
1 - 30 days
424,398
38,349,043
1,802
221,508
38,570,551
31 - 60 days
189,516
13,107,896
1,162
185,990
13,293,886
61 - 90 days
154,234
7,570,005
998
195,692
7,765,697
91 - 120 days
180,648
12,306,207
1,016
176,603
12,482,810
7,178,929
Current
121 - 150 days
113,001
7,030,063
886
148,866
151 - 180 days
101,158
4,627,735
915
220,570
4,848,305
181 - 210 days
109,275
4,443,198
938
409,420
4,852,618
5,793,790
139,251
5,606,116
989
187,674
250+ days
211 - 250 days
1,077,079
65,244,599
15,235
6,397,663
71,642,262
Total
3,843,513
396,027,884
35,245
19,994,212
416,022,096
In addition, trade accounts receivable include the following balances in relation to non-securitized bounced documents or documents in legal collection:
31,12,2014
31,12,2013
No, of customers
No, of customers
10,198
7,208,522
9,915
6,459,276
2,610
6,480,681
1,088
2,180,355
12,808
13,689,203
11,003
8,639,631
Notes receivable (bounced)
Notes receivable (legal collection)
Total
Changes in the provision for impairment
Opening balance
Acquisitions through business combinations
Increase in impairment recognized in profit or loss
Derecognition of impaired financial assets
Foreign currency exchange increase (decrease)
Total
31,12,2014
31,12,2013
ThCh$
ThCh$
110,017,516
91,518,268
-
3,322,525
51,504,892
48,165,696
(47,237,416)
(32,860,814)
734,795
(128,159)
115,019,787
110,017,516
Trade receivables include provided but unbilled services for ThCh$92,101,385 and ThCh$94,675,934, at December 31, 2014 and 2013, respectively.
Trade receivables mature on the dates stated in the related invoices.
For write-off purposes, the Group takes into account the following for each client segment:
>>People – Overdue balances are accrued for based on their aging until reaching 100% of the outstanding balance after 120 days in the case of mobile services
and 300 days for home wireline services.
54
>>Small and Medium Enterprises (SME) – 100% of the overdue balance is accrued for after 120 days in the case of mobile services and 180 days for wireline services.
>>Corporations – 100% of the overdue balance is accrued for after 360 days for mobile and wireline services.
>>Wholesale – 100% of the overdue balance is accrued for after 120 days for mobile and wireline services after performing a creditworthiness analysis of debtors.
Guarantees – For customers or segments with risk of uncollectibility actual guarantees are requested and/or credit insurance is contracted. Currently, in the case of
intermediaries for electronic recharges for mobile services (Indirect channel), risks are mitigated by requesting Bank Guarantee Certificates and/or credit insurance
contracts with reputable insurance companies.
Compliance incentives (credit improvements) – In the case of Small and Medium Enterprises, customers are encouraged to timely comply with payments in order
not to be included in public or private non-compliance records /DICOM Transunion – formerly Databusiness- and SIISA). In addition, for all segments (consumers/
SMEs) differentiated service suspensions are performed, telephone and field collection procedures are carried out, and in some cases contracts are not renewed
by the Company.
55
Information on Trade and Other Receivables by Segment
The most significant disaggregation for collection purposes taking into account the business-product combination is the “people-mobile services segment”.
The tables below show, in addition to the portfolio for the “people-mobile services segment”, information for “all other segments” detailed by service area.
December 31, 2014
Consumer Segment
Stages of
Arrears
Mobile Services
Not Renegotiated
Wireline Services
Renegotiated
Not Renegotiated
Gross
Impair-
Gross
Impair-
Balances
ment
Balances
ment
68,650,912
-
Renegotiated
Gross
Impair-
Gross
Impair-
Balances
ment
Balances
ment
Other Services
Total
Total
Not Renegotiated
Gross
Impair-
Net
Debt
ment
Debt
Gross
Impair-
Balances
ment
12,059
-
-
Total
-
77,145,876
-
77,145,876
1 - 30 days
4,200,265
1,661,681
57,524
27,419
2,583,348
837,380
344
58
-
-
6,841,481
2,526,538
4,314,943
31 - 60 days
2,285,502
1,662,962
62,428
40,581
685,656
338,047
2,148
623
-
-
3,035,734
2,042,213
993,521
61 - 90 days
2,193,393
2,046,558
52,892
38,148
465,016
296,181
6,311
2,209
-
-
2,717,612
2,383,096
334,516
91 - 120 days
2,146,650
2,032,106
43,706
35,733
434,051
321,666
4,833
2,417
-
-
2,629,240
2,391,922
237,318
121 - 150 days
2,178,531
2,178,531
36,226
36,226
468,216
342,211
3,284
1,807
-
-
2,686,257
2,558,775
127,482
151 - 180 days
1,969,853
1,969,853
50,921
50,921
436,127
364,779
5,247
3,149
-
-
2,462,148
2,388,702
73,446
181 - 210 days
2,045,080
2,045,080
64,376
64,376
478,147
427,838
4,670
3,736
-
-
2,592,273
2,541,030
51,243
211 - 250 days
2,492,174
2,492,174
60,153
60,153
746,179
642,807
10,849
8,832
-
-
3,309,355
3,203,966
105,389
Current
250+ days
Total
5,080,078
-
3,402,827
-
36,558,851
36,558,850
3,362,803
3,362,803
3,789,500
3,765,140
380,524
379,915
-
-
44,091,678
44,066,708
24,970
124,721,211
52,647,795
8,871,107
3,716,360
13,489,067
7,336,049
430,269
402,746
-
-
147,511,654
64,102,950
83,408,704
Total
December 31, 2014
Consumer Segment
Stages of
Arrears
Mobile Services
Not Renegotiated
Wireline Services
Renegotiated
Not Renegotiated
Renegotiated
Total
Impair-
Net
Debt
ment
Debt
-
153,205,942
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Balances
ment
Balances
ment
Balances
ment
Balances
ment
Balances
ment
77,878,662
-
17,218,650
-
55,675,371
-
1 - 30 days
16,167,015
1,897,342
3,012,986
3,477
10,864,357
433,891
6,647
31 - 60 days
4,943,181
849,376
1,626,674
673,148
3,867,460
356,968
61 - 90 days
2,588,411
422,358
1,476,091
1,249,557
3,016,201
91 - 120 days
1,290,614
424,392
5,668,788
3,229,897
121 - 150 days
1,280,716
558,462
39,632
151 - 180 days
1,182,742
680,575
181 - 210 days
981,879
211 - 250 days
Total
Total
Gross
Gross
Current
250+ days
Other Services
Not Renegotiated
1,709,862
-
153,205,942
375
407,378
-
30,458,383
2,335,085
28,123,298
13,196
771
419,567
-
10,870,078
1,880,263
8,989,815
587,046
16,331
2,404
116,520
-
7,213,554
2,261,365
4,952,189
1,727,007
522,299
19,133
4,252
55,922
-
8,761,464
4,180,840
4,580,624
21,609
1,278,700
473,638
8,690
2,994
82,736
-
2,690,474
1,056,703
1,633,771
27,406
17,129
1,314,271
562,878
12,046
4,927
146,113
-
2,682,578
1,265,509
1,417,069
701,965
40,698
33,914
1,124,943
742,984
13,252
6,501
73,483
-
2,234,255
1,485,364
748,891
1,184,843
1,074,138
60,076
60,076
810,519
463,375
10,919
6,616
75,040
-
2,141,397
1,604,205
537,192
19,837,599
19,506,955
3,101,146
3,101,146
10,615,901
10,076,608
1,817,700
1,812,764
826,036
36,198,382
34,847,503
1,350,879
127,335,662
26,115,563
32,272,147
8,389,953
90,294,730
14,219,687
2,641,311
1,841,604
3,912,657
56
723,397
-
350,030
350,030 256,456,507
50,916,837 205,539,670
December 31, 2013
Consumer Segment
Stages of
Arrears
Current
Mobile Services
Not Renegotiated
Wireline Services
Renegotiated
Not Renegotiated
Renegotiated
Total
Total
Gross
Impair-
Net
Debt
ment
Debt
-
84,676,933
Gross
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Balances
ment
Balances
ment
Balances
ment
Balances
ment
Balances
ment
75,014,466
-
-
-
-
84,676,933
1 - 30 days
4,490,408
2,059,448
100,479
47,894
1,686,851
551,828
639
109
-
-
6,278,377
2,659,279
3,619,098
31 - 60 days
2,724,679
1,718,710
81,570
53,024
665,782
346,620
2,131
618
-
-
3,474,162
2,118,972
1,355,190
61 - 90 days
2,510,502
1,748,053
56,561
40,794
533,473
304,935
4,011
1,404
-
-
3,104,547
2,095,186
1,009,361
91 - 120 days
2,647,361
2,088,290
72,468
59,250
721,949
509,782
5,212
2,606
-
-
3,446,990
2,659,928
787,062
121 - 150 days
2,114,761
2,114,761
55,361
55,361
667,602
466,461
1,928
1,060
-
-
2,839,652
2,637,643
202,009
151 - 180 days
1,851,655
1,851,655
58,076
58,076
448,044
355,813
1,689
1,014
-
-
2,359,464
2,266,558
92,906
181 - 210 days
1,759,282
1,759,282
53,782
53,782
425,856
378,690
28,511
22,810
-
-
2,267,431
2,214,564
52,867
211 - 250 days
2,730,039
2,730,038
63,963
63,963
512,824
430,274
2,623
2,099
-
-
3,309,449
3,226,374
83,075
30,493,516
30,493,297
2,694,253
2,694,253
3,709,243
3,689,850
308,109
307,959
-
-
37,205,121
37,185,359
19,762
126,336,669
46,563,534
9,361,586
3,126,397
12,900,171
7,034,253
363,700
339,679
-
-
148,962,126
57,063,863
91,898,263
Total
250+ days
Total
6,125,073
-
3,528,547
-
8,847
Total
Other Services
Not Renegotiated
December 31, 2013
Consumer Segment
Stages of
Arrears
Current
Mobile Services
Not Renegotiated
Wireline Services
Renegotiated
Not Renegotiated
Renegotiated
Other Services
Total
Total
Not Renegotiated
Gross
Impair-
Net
Debt
ment
Debt
Gross
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Gross
Impair-
Balances
ment
Balances
ment
Balances
ment
Balances
ment
Balances
ment
108,019,518
-
-
51,117,920
-
-
164,916,315
1 - 30 days
21,010,382
3,113,456
101,808
6,215
9,907,167
378,439
18,518
952
1,254,299
-
32,292,174
3,499,062
28,793,112
31 - 60 days
5,715,019
879,154
95,245
18,330
3,405,874
567,132
7,044
1,635
596,542
-
9,819,724
1,466,251
8,353,473
61 - 90 days
2,668,755
1,329,268
108,102
41,243
1,482,996
349,230
27,018
6,192
374,279
-
4,661,150
1,725,933
2,935,217
91 - 120 days
7,374,927
3,682,297
49,742
27,143
1,373,755
424,651
49,181
16,151
188,215
-
9,035,820
4,150,242
4,885,578
121 - 150 days
2,887,806
2,560,811
70,415
70,415
1,244,473
483,501
21,117
9,162
115,466
-
4,339,277
3,123,889
1,215,388
151 - 180 days
1,391,642
1,166,004
150,037
150,037
812,600
383,810
10,681
5,644
123,881
-
2,488,841
1,705,495
783,346
181 - 210 days
1,241,678
1,058,005
317,675
317,675
948,860
595,587
9,331
5,140
67,643
-
2,585,187
1,976,407
608,780
211 - 250 days
1,584,947
1,398,329
108,780
108,780
675,048
378,221
12,308
7,735
103,258
48,256
2,484,341
1,941,321
543,020
16,527,649
16,200,102
2,044,797
2,044,797
14,287,234
13,632,607
1,299,687
1,209,773
277,774
277,774
34,437,141
33,365,053
1,072,088
168,422,323
31,387,426
8,006,108
2,784,635
85,255,927
17,193,178
2,211,440
1,262,384
3,164,172
250+ days
Total
4,959,507
756,555
-
62,815
326,030 267,059,970
- 164,916,315
52,953,653 214,106,317
At December 31, 2014 and 2013, the tables above include provided but unbilled services which in the case of the people segment amount to ThCh$55,705,538 and
ThCh$59,551,162 respectively and in the case of other segments, to ThCh$36,395,847 and ThCh$35,124,772, respectively.
57
9. TRADE RECEIVABLES DUE FROM RELATED PARTIES
The table below shows the detail of transactions and balances with persons or legal entities related to the mentioned parents as well as the benefits received by
the Group’s Board of Directors and key management personnel.
As discussed in Note 1. a), the controlling shareholder of Entel-Chile S.A. is Inversiones Altel Ltda. (Taxpayer ID 76.242.520-3), the owner of 54.76% of the Company’s
current shares. 99.99% of Altel Ltda. is controlled by Almendral S.A. (Taxpayer ID 94.270.000-8).
Almendral S.A. is controlled by a group of shareholders who signed a joint interest agreement on January 24, 2005. The agreement was signed by the groups Matte,
Fernández León, Hurtado Vicuña, Consorcio, Izquierdo and Gianoli.
a) Due from:
Current
Tax ID
Company
91.440.000-7
Forestal Mininco S,A,
Country
Chile
Relationship
Currency
Common Director
CLP
12,31,2014
12,31,2013
ThCh$
ThCh$
23,925
54,972
95.304.000-K
CMPC Maderas S,A,
Chile
Common Director
CLP
26,794
31,385
96.529.310-8
CMPC Tissue S,A,
Chile
Common Director
CLP
60,759
54,475
96.532.330-9
CMPC Celulosa S,A,
Chile
Common Director
CLP
99,788
92,058
96.768.750-2
Servicios Compartidos CMPC S,A,
Chile
Common Director
CLP
280,769
288,882
492,035
521,772
Total
Starting from 2012, only transactions and balances with related parties exceeding ThCh$150,000 per annum are reported.
b) Transactions:
The Company conducts transactions with related parties domiciled in Chile. The detail is as follows:
31,12,2014
Tax ID
Company
Relationship
Transaction
31,12,2013
Amount
Credit (debit to pro-
Amount
Credit (debit to pro-
ThCh$
fit for the period)
ThCh$
fit for the period)
(Cargo) / Abono
(Cargo) / Abono
91.440.000-7
Forestal Mininco S,A,
Common Director
Services provided
278,935
278,935
148,490
148,490
95.304.000-K
CMPC Maderas S,A,
Common Director
Services provided
170,527
170,527
125,831
125,831
96.529.310-8
CMPC Tissue S,A,
Common Director
Services provided
288,422
288,422
252,736
252,736
96.532.330-9
CMPC Celulosa S,A,
Common Director
Services provided
347,321
347,321
267,331
267,331
96.768.750-2
Servicios Compartidos CMPC S,A,
Common Director
Services provided
295,780
295,780
1,314,620
1,314,620
Telecommunication services provided to related parties correspond to standard services included in the Entel Group’s business line (mobile and wireline telephone
services, Internet, data services and call center).
c) Key management personnel compensation:
The Parent is managed by a Board of Directors comprised of nine members, which compensation for the first the years 2014 and 2013, amounted to ThCh$415,489
and ThCh$407,906, respectively.
For the same periods, key management personnel compensation amounted to ThCh$5,258,307 and ThCh$4,842,330, respectively. These amounts include annual
bonuses of ThCh$2,974,841 and ThCh$2,307,155, respectively
58
The number of the key management personnel is 19 and 23 for both periods.
10. INVENTORIES
Inventories are primarily comprised of mobile telephone handsets and accessories. Inventories are stated in conformity with Note 3 d. and are detailed as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
103,084,544
148,836,793
Goods
1,072,117
356,844
Work in progress
2,482,717
832,413
Other inventories
482,289
431,117
107,121,667
150,457,167
Handsets and accessories for mobile services
Total
For each period, there are no liens over items of property, plant and equipment.
For mobile phone handsets, the cost of handsets is recognized directly in profit or loss when contracts are signed.
For both periods, ThCh$338,908,470 and ThCh$307,528,561, respectively, were charged to profit or loss for cost of sales, commercial costs and/or consumption of
supplies.
For the same period, there have been no assignments to property, plant and equipment from adjustments to net asset value.
During 2014 and 2013, respectively, ThCh$4,448,268 and ThCh$1,074,825, were recognized in profit or loss for inventory write downs, respectively from technological and/or market obsolescence. Accumulated impairment losses for each period amount to ThCh$5,931,007 and ThCh$5,026,904, respectively.
During 2014 and 2013, there have been no reversals of previously recognized impairment losses.
11. CURRENT TAX ASSETS AND LIABILITIES
At December 31, 2014 and 2013, the Group Companies’ provision for income tax expense is offset by mandatory monthly provisional income tax payments.
The aggregate accumulated offsetting amounts of those companies with recoverable balances were ThCh$5,336,220 and ThCh$16,692,435 at December 31, 2014
and 2013, respectively. These balances are presented within current tax assets in current assets, as follows:
Remaining balance of value-added tax fiscal credit
31.12.2014
31.12.2013
ThCh$
ThCh$
40,874,385
11,923,674
Income tax net monthly provisional payments
5,336,220
16,692,435
Other taxes
6,169,553
6,988,049
52,380,158
35,604,158
Total
The aggregate amount of balances payable was ThCh$12,866,595 and ThCh$1,346,165, at December 31, 2014 and 2013 and are presented within current tax liabilities in current liabilities.
59
12. INTANGIBLE ASSETS
Intangible assets include licenses, rights of way and others, as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
Total intangible Assets, Net
136,924,227
133,035,056
Intangible Assets with finite life, Net
136,924,227
133,035,056
Identifiable Intangible Assets, Net
136,924,227
133,035,056
5,763,906
7,030,615
Patents, Trademarks and other rights, Net
Other identifiable Intangible Assets, Net
131,160,321
126,004,441
Total intangible Assets, Gross
204,293,145
194,802,167
Intangible Assets with finite life, Gross
204,293,145
194,802,167
Patents, Trademarks and other rights, Gross
39,008,405
39,025,554
165,284,740
155,776,613
( 67,368,918 )
( 61,767,111 )
(67,368,918)
( 61,767,111 )
Accumulated Amortization and Impairment, Patents Trademarks and Other Rights
(33,244,499)
(31,994,939)
Accumulated Amortization and Impairment, Other Identifiables Intangibles Assets
(34,124,419)
(29,772,172)
Other identifiable Intangible Assets, Gross
Total Accumulated Amortization and Impairment, Intangible Assets
Accumulated Amortization and Impairment, Identifiable Intangible Assets
At December 31, 2014, the net value of the main components of intangible assets is as follows.
Net Value
Provider
Term
Residual
Term
(Months)
(Months)
Patents, trademarks and other rights:
Customer relationships
4,843,534
CIENTEC and TRANSAM takeovers
180
120
Easements
586,680
Real state owners
120 - 240
39 - 136
Fiber optic cable rights of use
333,692
Global Crossing
84 - 168
11 - 23
Total
5,763,906
Other identifiable intangible assets:
900 MHz band concession
11,054,413
State of Chile
480 - 360
429 - 315
2600 MHz band concession (4G tender)
3,968,921
State of Chile
360
334
AWS 1700-2100 MHz band concession
58,716,075
State of Peru
240
240
41,980,928
State of Peru
480
413
8,571,326
State of Peru
156
116
5,688,624
State of Peru
171 - 240
73 - 222
Other
1,180,034
Total
131,160,321
Accumulated impairment losses shown in the table above relate mainly to the rights of use over optic fiber cable capacities. These accumulated impairment losses
amount to ThCh$2,857,281 at December 31, 2014 and originated mainly in prior years as a result of adjustment of such assets to their recoverable amount due to
a decrease in market demand.
No fully amortized intangible assets are still in use.
There are no restrictions over the ownership of intangible assets and no total or partial guarantees have been granted over intangible assets
At December 31, 2014, the Group does not have any significant commitments for the acquisition of intangible assets.
60
Identified changes in intangible assets December 31, 2014 and 2013 are as follows:
December 31, 2014
Patents, Trademarks and Other Rights, Net
Other Identifiable Intangible Assets, Net
ThCh$
ThCh$
ThCh$
126,004,441
133,035,056
Opening balance
7,030,615
Additions
Total Identifiable Intangible Assets, Net
-
934,516
934,516
(1,249,560)
(4,352,247)
(5,601,807)
-
9,575,733
9,575,733
(17,149)
(1,002,122)
(1,019,271)
5,763,906
131,160,321
136,924,227
Patents, Trademarks and Other Rights, Net
Other Identifiable Intangible Assets, Net
Total Identifiable Intangible Assets, Net
ThCh$
ThCh$
ThCh$
8,948,392
21,422,849
30,371,241
Additions
-
54,843,254
54,843,254
Acquisition through business combinations
-
50,210,390
50,210,390
(1,918,851)
(2,036,809)
(3,955,660)
1,579,345
Amortization
Effect of movement in exchange rates
Other increases (decreases)
Closing balance
December 31, 2013
Opening balance
Amortization
Effect of movement in exchange rates
Closing balance
-
1,579,345
1,074
(14,588)
(13,514)
7,030,615
126,004,441
133,035,056
The amortization schedule for intangible assets is as follows:
INTAGIBLES
ASSETS
Patents, Trademarks and Other Rights
Software
Minimum life or rate (years)
Maximum life or rate (years)
4
20
4
4
Other Identifiable Intangible Assets
10
40
Rights of Use over Optic Fiber Cables
15
15
13. BUSINESS COMBINATIONS AND GOODWILL
13.1. Business combination
On August 19, 2013, Entel Chile S.A. directly acquired 90% of Nextel del Peru and the remaining 10% through its subsidiary Entel Inversiones S.A., from the American
Company NII Holdings. This transaction was announced in April 4, 2013 and amounted to US$410.6 million for the total share capital of Nextel del Peru.
This transaction allows Entel S.A. to expand the sale of services and its presence in Peru, a country with a strong economy and an attractive market which presents
a good potential for development.
Initial plans are to focus on strengthening the current infrastructure, network expansion and increase the sale of handsets and services to Nextel customers. Starting in October, 2014, Nextel Perú will officially changed its name to Entel Perú, thereby consolidating the change in brand name in the Peruvian market. As a result
the Company launched a high-impact advertising campaign focused in strengthening the new brand name and services provided to the market.
61
Nextel del Peru S.A. was an indirect subsidiary of NII Holdings, Inc. The Company was incorporated on December 30, 1987, with legal domicile at Av. República de
Colombia No.791, San Isidro, Lima, Peru.
The Company provides mobile telephone services in Peru, through the Push-To-Talk – IDEN technology, and 3G WCDMA services. It is focused mainly on the corporate market, and its market share in the Peruvian market is approximately 5%.
Entel has not provided any guarantees in connection with the transaction and there is no ownership or management relationship of Entel with the seller.
Goodwill of ThCh$1,157,469 arising from the business combination, is due mainly to the expectations of the mobile telephone business in Peru, which shows attractive growth opportunities in an evolving market. Such goodwill is not expected to be tax deductible for income tax purposes in Chile.
13.2. Goodwill
Changes in goodwill are as follows:
Opening balance
Company
Segment
01.01.2013
ThCh$
Entel PCS Telecomunicaciones S.A.
Cientec Computación S.A.
Consumer
43,384,200
Additions
ThCh$
-
Foreign currency
Closing balance
Foreign currency
Closing balance
differences
12.31.2013
differences
31.12.2014
ThCh$
ThCh$
ThCh$
ThCh$
-
43,384,200
-
43,384,200
Corporations
2,402,281
-
-
2,402,281
-
2,402,281
Entel Perú S.A. (Ex Nextel del Perú)
Consumer
-
1,157,469
42,312
1,199,781
98,804
1,298,585
Transam Comunicación S.A.
Consumer
108,646
-
-
108,646
-
108,646
Will S.A.
Consumer
156
-
-
156
-
156
45,895,283
1,157,469
42,312
47,095,064
98,804
47,193,868
Final balance, Net
Goodwill is subject to annual impairment testing at each reporting date. No impairment indicators exist since the date of acquisition.
The main goodwill balances relate to the following business combinations:
a.The goodwill related to the investment in the subsidiary Entel PCS Telecomunicaciones S.A. arose from the merger in which the parent acquired all the assets
and assumed all the liabilities of the subsidiary Entel Telefonía Personal S.A. made by the end of 2010.
The assets of the taken over company included 94.64% of the equity of Entel PCS Telecomunicaciones S.A. as well as an asset for goodwill paid generated in
December 2002 as a result of the acquisition of 25% of the shares owned by Propel Inc. (USA).
When 100% of control over Entel Telefonía Personal S.A. was acquired by the Entel Group, the former had almost exclusive control over two subsidiaries in charge
of significant concessions in the 1900MHz band which allowed developing the digital mobile telephone service business in Chile.
The qualitative factors considered in the goodwill recognized included the high growth potential and expected profitability of the mobile telephone business, the
higher flexibility in relation to investing and operational decisions, especially considering the exclusion of a minority interest hold by a foreign shareholder within
the telecommunication equipment manufacturing industry, and the market position of the subsidiary at the time.
62
The periodic performance of impairment tests include the present and forecast contribution of revenue resulting from mobile telephone service transactions,
the level of updating and capacity of technological platforms, the satisfaction level of customers, market recognition and the status of technical and marketing
management.
b.The goodwill related to the investment in the subsidiary Cientec Computación S.A. arose from the acquisition of 100% of its shares from its prior shareholders in December 2008. The selling shareholders were Inversiones Balilia Limitada and Millenium Fondo de Inversiones Privado, legal entities not
directly or indirectly related to the acquirer.
The purpose of acquiring this company was to expand the Group’s capacity to offer operating continuity services within the Information Technology business.
Cientec was a well reputed company in providing operating continuity business services to companies (hosting/housing services, critical business applications
for IT center management, sale and training platforms).
The qualitative factors considered in the goodwill recognized relate to the reputation of Cientec among its customers, the transfer of management and higher
efficiencies related to the critical customer mass.
The periodic performance of goodwill impairment tests include the maintenance and growth of market share, maintenance of service standards and the profitability and growth potential of related business area.
c.Impairment tests for both assets recognized are based on the fair value and level of each cash-generating unit. Impairment tests are performed at the
end of each annual period when indications of impairment exist requiring such tests. Should the fair value be lower than the net carrying amount, an
impairment loss that cannot be reversed is recognized in profit or loss.
The key assumptions used for calculating the recoverable amounts are projected cash flows considering the time of future services involved in each case as
considered by the Company at short, medium and long-term using a discount rate related to the Company’s capital cost ranging between 9.5% and 10.5%.
The recoverable amounts of cash-generating units where goodwill have been identified exceed their carrying amounts. Accordingly, no impairment has been
recognized for this concept.
63
14. PROPERTY, PLANT AND EQUIPMENT
The gross values, depreciation and net values of property, plant and equipment at December 31, 2014 and 2013 are as follows:
Total Property, Plant and Equipment, Net
Construction in progress, Net
Land, Net
31.12.2014
31.12.2013
ThCh$
ThCh$
1,614,978,515
1,334,268,920
415,400,118
304,893,754
12,558,726
12,347,648
Buildings, Net
158,326,378
87,412,283
Plant and equipment, Net
946,983,976
871,437,918
IT equipment, Net
48,974,127
33,746,407
Fixed facilities and accesories, Net
20,884,440
13,672,739
Motor vehicles, Net
523,344
579,711
Leasehold improvements, net
4,162,949
3,504,260
Other property, plant and equipment, Net
7,164,457
6,674,200
4,303,311,996
3,830,442,996
415,400,118
304,893,754
Total Property, Plant and Equipment, Gross
Construction in progress, Gross
Land, Gross
12,558,726
12,347,648
293,188,780
213,603,077
3,106,395,428
2,884,810,122
IT equipment, Gross
254,082,898
213,495,721
Fixed facilities and accesories, Gross
176,692,976
159,597,100
Buildings, Gross
Plant and equipment, Gross
Motor vehicles, Gross
Leasehold improvements, Gross
Other property, plant and equipment, Gross
Total Acumulated depreciation and Impairment, Property, Plant and Equipment
Acumulated depreciation and Impairment, Building
1,524,090
1,447,218
21,231,271
19,032,237
22,237,709
21,216,119
( 2,688,333,481 )
( 2,496,174,076 )
(134,862,402)
(126,190,794)
(2,159,411,452)
(2,013,372,204)
Acumulated depreciation and Impairment, IT Equipment
(205,108,771)
(179,749,314)
Acumulated depreciation and Impairment, Fixed facilities and accesories
(155,808,536)
(145,924,361)
Acumulated depreciation and Impairment, Plant and Equipment
Acumulated depreciation and Impairment, Motor Vehicles
(1,000,746)
(867,507)
Acumulated depreciation and Impairment, Leasehold Improvements
(17,068,322)
(15,527,977)
Acumulated depreciation and Impairment, Others
(15,073,252)
(14,541,919)
64
Transactions in 2014 for property, plant and equipment items are as follows:
Construction
in progress
Opening
balance
Changes
304,893,754
Additions
Land
Building, Net
equipment,
Net
12,347,648
Other
Fixed
IT equipment,
facilities and
Motor vehi-
Net
accesories,
cle, Net
Net
87,412,283
871,437,918
33,746,407
13,672,739
Leasehold
improve-
plant and
equipment,
Net
579,711
3,504,260
-
142,119
128,628,989
17,362,267
6,950,210
179,846
999,575
-
-
-
( 7,155,887)
( 6,095)
( 35,288)
( 14,250)
-
Depreciation expense
-
-
( 199,082,273)
( 19,369,629)
( 6,529,639)
( 241,725)
Impairment loss
recognized on profit or
loss
-
-
-
211,078
741,720
76,132,312
Other increases
(decreases)
Total changes
Final balance
1,244,807
( 248,902,303)
( 6,102,056)
-
( 3,745,451)
property,
ment, Net
Disposals
Effect of changes in
exchange rates
358,163,860
Plant and
-
-
-
7,352,578
890,045
481,093
20,563
149,548,102
16,351,132
6,345,325
( 801)
( 1,640,269)
Property,
plant and
equipment,
Net
6,674,200 1,334,268,920
1,411,949
513,838,815
( 33,985)
( 7,245,505)
( 1,067,876)
( 234,033,467)
-
-
( 3,745,451)
-
264,557
11,206,441
( 84,388)
688,762
490,257
-
1,299,383
110,506,364
211,078
70,914,095
75,546,058
15,227,720
7,211,701
( 56,367)
658,689
415,400,118
12,558,726
158,326,378
946,983,976
48,974,127
20,884,440
523,344
4,162,949
7,164,457 1,614,978,515
Transactions in 2013 for property, plant and equipment items are as follows:
Construction
in progress
Opening
balance
Changes
Additions
Acquisition through a
business combinations
Land
Building, Net
equipment,
Net
271,913,063
9,433,203
90,749,948
719,405,042
221,069,744
6,473,398
2,190,455
8,806
702,289
8,193,915
Other
Fixed
IT equipment,
facilities and
Motor vehi-
Net
accesories,
cle, Net
Net
11,737,914
6,519,632
200,837
137,378,074
6,099,904
1,131,180
158,887
68,417,094
10,523,263
5,581,473
249,884
Disposals
-
-
( 6,955,745)
( 2,886,938)
( 1,028)
( 201,661)
( 32,095)
-
-
( 5,446,011)
( 221,164,878)
( 9,655,303)
( 2,461,847)
( 132,367)
Impairment loss
recognized on profit or
loss
-
-
Effect of changes in
exchange rates
238,274
Total changes
( 194,800,725)
-
21,701
-
( 4,112,790)
-
Leasehold
property,
improve-
plant and
ment, Net
equipment,
Net
Depreciation expense
Other increases
(decreases)
Final balance
Plant and
-
-
1,974,240
7,290
( 1,320,276)
Property,
plant and
equipment,
Net
5,516,337 1,117,450,216
860,440
368,904,780
-
100,141,316
( 62,127)
( 10,139,594)
( 1,029,601)
( 241,210,283)
-
-
-
( 35,238)
3,161,767
73,508
266,393
2,402,539
263,184
( 2,772)
7,686
594,977
171,999,775
14,778,473
3,106,734
126,879
2,843,006
1,424,389
( 4,112,790)
32,980,691
2,914,445
( 3,337,665)
152,032,876
22,008,493
7,153,107
378,874
1,530,020
1,157,863
304,893,754
12,347,648
87,412,283
871,437,918
33,746,407
13,672,739
579,711
3,504,260
6,674,200 1,334,268,920
65
-
During 2014, there have been interest that should be charged to work in progress and related materials for ThCh$4,280,759 and during 2013 no amounts were
capitalized in conformity with the policy described in Note 3f.
The table below shows the net balances of property, plant and equipment under finance lease agreements.
Buildings, Net
31.12.2014
31.12.2013
ThCh$
ThCh$
8,144,671
15,762,829
Plant and equipment, Net
Buildings, Gross
Plant and equipment, Gross
-
-
11,968,177
20,463,536
8,284,494
8,284,494
Accumulated depreciation and impairment, Buildings
(3,823,506)
(4,700,707)
Accumulated depreciation and impairment, Plant and equipment
(8,284,494)
(8,284,494)
8,144,671
15,762,829
Total property, plant and equipment and finance lease, Net
Leased real estate corresponds to properties used for the Group’s offices. The term of current lease agreements is as follows:
Stores
Edificio Costanera (Floor 15)
Edificio Costanera (Floors 12-13-14)
Beginning date
Fecha de Término
ThCh$
ThCh$
February-98
February-18
September-98
August-18
December-98
November-18
Group companies have procedures intended to identify possible impairment losses in property, plant and equipment.
Policies intended to determine the impairment of property, plant and equipment are based on the permanent analysis of impairment indicators. When impairment
is estimated to exist, the Group estimates the recoverable amount of the impaired assets.
For these purposes, the Group has asset control systems including different levels of detail for items and association to service technological platforms.
During 2013 and 2012, impairment losses arose from the retirement of equipment, damaged by the February 2010 earthquake, affected by technological changes
or decreases in their recoverable amount due to decreases in the prices for certain services and client equipment that are very unlikely to be reused or sold, and
equipment with remaining useful lives exceeding the estimated economic use periods.
Impairment losses, Property, Plant and Equipment
66
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
3,745,451
4,112,790
Impairment losses for property, plant and equipment recorded in profit or loss are as follows:
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
Customer facilities
2,123,870
2,126,280
Stored assets
1,300,000
1,414,639
Network components
321,581
571,871
3,745,451
4,112,790
Minimum life or rate (years)
Maximum life or rate (years)
20
50
External plant
7
25
Mobile handsets
3
7
IT equipment
3
4
Fixed facilities and accesories
3
10
Motor vehicles
3
7
Leasehold improvements
5
5
Others Property, Plant and Equipment
5
10
Total
Impaired items of property, plant and equipment are as follows:
Assets
Buildings
Plant and equipment
For assets which useful life is completed, the Group has not determined recoverable amounts of possible gains from sale as it is difficult to forecast the complementary economic efficiency period of such assets due mainly to that fact that their ageing has increased their technological risk.
There are no ownership restrictions over any assets except for those usual for assets under finance leases. In addition, no total or partial guarantees have been
granted over these assets.
At December 31, 2014 and 2013, commitments related to the acquisition of property, plant and equipment including purchase orders to suppliers and contracts
related to the construction of civil works, amount to ThCh$4.374.487 and ThCh$7.818.261, respectively.
Property, plant and equipment do not include any items out of service with significant value.
The gross value of fixed assets that although totally depreciated are still in use amounts to ThCh$1,082,534,313. In general, these assets correspond to assets with
high technical obsolescence which retirement or replacement becomes economically convenient upon completion of the services being used, increase in failure
risks, suspension of the technological support from the manufacturer or other circumstances. The value in use of these assets has not been estimated due to the
uncertainty regarding the remaining use period.
By the end of 2009, the Fondo de Desarrollo de las Telecomunicaciones, an entity dependent of the Ministerio de Transportes y Telecomunicaciones awarded the
Entel Group the project named “Proyecto Infaestructura Digital para la Competitividad e Innovaciòn”, which purpose is to provide mobile internet services to 1,400
locations in Chile.
As part of this project, as of December 31, 2014, the Group has carried out works for ThCh$73,069,541. As per the agreement entered into with the Chilean Government, the Group has received grants of ThCh$24,942,516. From this amount, ThCh$23,942,860 has been recorded as goodwill for works performed and
ThCh$486,742 as advanced payments, charged to works to be performed or in the final acceptance stage
67
15. INCOME TAX AND DEFERRED TAX
a) General Information
As of December 31, 2014, the Taxable Income Fund (FUT) established by the Income Tax Law, used to control tax credits in favor of shareholders, that are granted
at the time of distributing dividends recognized in retained earnings, for each Group company in ThCh$, is detailed as follows:
Company
Empresa Nacional de
Telecomuncaciones S.A.
Profit with tax credits
Profit without tax credits
Tax Credits
21%
20%
17%
134,843,270
392,076,059
-
-
133,863,428
77,780,045
224,423,533
68,997,429
220,231
90,914,138
Entel Inversiones S.A.
1,903,415
1,106,294
21,846,701
110,471
5,257,164
Entel Comercial S.A.
390,947
3,689,267
-
-
1,026,239
Entel Contac Center S.A.
806,206
2,090,315
1,350,153
10,165
1,013,843
Entel Servicios Telefónicos S.A.
320,003
480,926
1,987,659
294,055
612,405
11,327,008
9,910,580
-
16,806
5,488,622
-
819,510
-
141,521
204,877
227,370,894
634,596,484
94,181,942
793,249
238,380,716
Entel Telefonía Local S.A.
Transam S.A.
Total ThCh$
b) Deferred taxes
Deferred tax assets and liabilities stated in conformity with Note 3k are as follows:
Concept
31.12.2014
Changes in
Assets
Liabilities
Profit or loss
Equity
B. combination
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
Depreciation of property, plant and equipment
80,778,871
-
21,579,135
9,279,227
-
Amortization of intangible assets
10,543,401
12,773,752
(7,313)
(201,576)
-
Accumulations (or accruals)
12,038,454
944
1,505,521
630,714
-
7,686,550
2,923
487,935
1,393,883
-
65,106
570,786
(9,236,942)
(543,893)
-
25,765,103
-
1,767,961
2,241,140
-
Derivatives adjusted to market value
-
-
(55,570)
-
-
Assets/liabilities at amortized cost
-
4,456,348
(909,412)
(1,017,394)
-
Deferred revenue
4,042,850
-
542,420
360,393
-
Assets acquired under finance leases
1,115,545
-
1,531,094
210,728
-
372,623
827,732
23,495
(74,388)
-
92,103,395
-
44,668,706
3,937,347
-
Other
3,557,947
1,357,256
(393,470)
232,869
-
Total
238,069,845
19,989,741
61,503,560
16,449,050
-
Accruals
Impairment of property, plant and equipment
Impairment of receivables (doubtful accounts)
Assets sold under finance leases
Tax losses
68
Concept
31.12.2014
Assets
Changes in
Liabilities
Profit or loss
Equity
B. combination
ThCh$
ThCh$
ThCh$
ThCh$
ThCh$
Depreciation of property, plant and equipment
50,505,774
585,265
9,361,132
-
27,346,661
Amortization of intangible assets
10,333,337
12,354,799
520,405
-
(119,364)
Accumulations (or accruals)
9,901,275
-
1,639,865
-
762,697
Accruals
5,846,251
44,442
(214,111)
41,518
3,706,671
Impairment of property, plant and equipment
9,670,224
395,069
471,471
-
-
Impairment of receivables (doubtful accounts)
21,769,830
13,828
3,448,118
-
-
60,970
5,400
83,963
68,654
-
-
2,529,542
(1,444,573)
-
-
Deferred revenue
3,140,037
-
(3,682,565)
-
348,961
Assets acquired under finance leases
1,051,005
1,677,282
668,752
-
-
361,988
766,204
43,037
-
-
43,497,342
-
9,180,203
-
33,341,505
Other
3,849,316
1,488,024
(798,012)
-
(962,560)
Total
159,987,349
19,859,855
19,277,685
110,172
64,424,571
Derivatives adjusted to market value
Assets/liabilities at amortized cost
Assets sold under finance leases
Tax losses
c) Unrecognized deferred tax asset
Certain subsidiaries have not recognized deferred taxes in relation to the use of tax losses against future profit. At the end of each period, unrecognized tax assets
that do not expire amount to ThCh$2,301,705 and ThCh$ 3,094,310, respectively.
Accumulated
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
52,828,828
48,740,714
Adjustments to current tax from prior period
338,810
113,042
Other current tax expense (income)
321,937
375,630
53,489,575
49,229,386
Current Tax Expense
Current tax expense, Net, Total
Deferred Income Tax Expense
Tax Expense (Income) related to the Origination and Reversal of Temporary Differences
(61,503,560)
(19,277,685)
Deferred tax expense (income), Net, Total
(61,503,560)
(19,277,685)
(8,013,985)
29,951,701
Income Tax Expense (Income)
d) Current and deferred expense (income)
As a result of the instructions issued by the SVS in its Circular No. 856 of October 17, 2014, differences in deferred tax assets and liabilities generated as a direct
effect of the increase in the corporate income tax rate required by Law No.20.780 as of September 30, 2014, were exceptionally recognized for one time only in
equity in the caption Retained earnings (accumulated deficit) for ThCh$9,864,071. Likewise, the effects of the measurement of deferred taxes arising subsequent to
that date are recognized in profit or loss for the year in conformity with the criteria indicated above.
69
e) Reconciliation between the legal tax rate and the effective tax rate (amounts):
For each period, the reconciliation between the expense using the legal tax rate and expense using the effective tax rate is as follows:
Accumulated
Income Tax Expense Using the Domestic Tax Rate
Effect of Tax Rates in Foreign Jurisdictions
Tax Effect From Permanent Differences
Adjustments/Fluctuation of Tax Investments
Price-level adjustment on paid-in capital
Tax estimated using the Domestic Tax Rate
Adjustments to Tax Expense Using the Domestic Tax Rate, Total
Tax Expense Using the Effective Tax Rate
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
10,188,447
35,380,109
(11,998,361)
(1,670,780)
15,729,836
2,579,125
(17,120,527)
(5,865,514)
(696,239)
(529,604)
(4,117,141)
58,365
(18,202,432)
(5,428,408)
(8,013,985)
29,951,701
f) Reconciliation between the domestic tax rate and the effective tax rate (in percentages):
Accumulated
Legal Tax Rate
Effect of Tax Rates in Foreign Jurisdictions
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
21.00%
20.00%
-24.73%
-0.94%
Effect on Tax Rate of:
Adjustments/Fluctuation of Tax Investments
32.42%
1.46%
-35.29%
-3.32%
Tax estimated using the Domestic Tax Rate
-1.44%
-0.30%
Other increase (decrease) in expenses using the domestic tax rate
-8.49%
0.03%
Adjustments to the Domestic Tax Rate, Total
-37.52%
-3.07%
Effective Tax Rate
-16.52%
16.93%
Price-level adjustment on paid-in capital
70
16. OTHER FINANCIAL LIABILITIES
At December 31, 2014 and 2013, other financial liabilities are as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
482,431
494,033
15,611,596
4,262,456
Current liabilities
Derivatives - Designated as hedges
1,152,325
2,900,629
614,463
18,747,030
2,911,658
838,958
20,772,473
27,243,106
181,302,042
287,219,648
1,249,373,917
515,681,614
3,582,507
4,498,076
Subtotal
Non-current liabilities
Derivatives - Designated as hedges
-
5,751,774
Subtotal
1,434,258,466
813,151,112
Total other financial liabilities
1,455,030,939
840,394,218
a) Interest bearing borrowings – At December 31, 2014, outstanding bank loans were as follows:
>>Joint loan provided by the Bank of Tokyo-Mitsubishi UFJ, Ltd., HSBC Bank USA, Mizuho Corporate Bank Ltd. and Scotiabank
& Trust (Cayman) Ltd. obtained in
September 2012 for USD$400 million and payable over a five-year period in installments of USD$100 million in September 2015, USD$150 million in September
2016, and USD$150 million in September 2017. During July, 2014, the company prepaid US$100 million that was schedule to mature in September 2015. The
outstanding balance is US$300 million at an annual interest rate of Libor USD 90 days+1.30%.
b) Liabilities with bondholders - this corresponds to the following:
>>Placement of bonds in the international market in October 2013 for US$1,000 million, with an average maturity of 10 years and a fixed rate of 4.875%
>>Placement of bonds in the local market in July 2014 for UF7 million, with a maturity of 21 years and a fixed rate of 3.50%.
>>Placement of bonds in the international market in July 2014 for US$800 millions, with an average maturity of 11.5 years and a fixed rate of 4.750%
c) Derivatives used for hedging-cash flow hedges
– this balance corresponds to the market value of derivative contracts that have been designated
as exchange rate and interest rate hedges, Cross Currency Swap (CCS), for bonds placed in the international market. These CCS contracts comprise the replacement
of obligations for US$1,425 millions at a fixed rate of 4.875% and 4.75% with obligations in Unidades de Fomento (UF) of 15.13 million and obligations in Chilean
pesos of ThCh$427,930,200, both at rates ranging from 3.57% to 7.73%.
71
d) Derivatives at fair value though in profit or loss. These comprise the following:
>>forward foreign currency buy/sell contracts (FR), including the purchase obligation of US$708.3 million and €3 million totaling ThCh$307,799,480 and 589 millions of Nuevos Soles.
>>Interest rate Swap contracts (IRS) on a notional amount of US$200 million on which interest are received at a fixed rate of 4.75% and paid at a rate of LIBOR US$
at 360 days + a spread ranging from 1.78% and 2.075%.
In determining the market value of derivatives, cash flows are discounted considering inputs (interest rates) quoted in active markets. Accordingly, market values
determined are classified in level 2 of the hierarchy established by IFRS 7.
The maturity schedule of Other financial liabilities plus Trade and other receivables at December 31, 2012 and 2011 is shown in the table below. The information is
based on a comparison between carrying amounts (fair value or amortized cost, as applicable) and nominal values (projected cash flows at nominal value).
For purposes of measurement, the maturity profile of nominal cash flows within Other financial liabilities shown in the table above has considered the cash flows
related to the repayment of principal and interest (not discounted values) in the case of financial debts, and the clearing value of financial derivative contracts with
negative balances using exchange rates in force at the reporting date.
72
73
VENCImientos de pasivos financieros al 31.12.2014
NOMINAL VALUES
Creditor
The Bank of Tokyo-Mitsubishi
UFJ, Ltd
Mizuho Corporate Bank, Ltd.
HSBC Bank USA, National
Association
Claro Infraestructura S.A.
(Telmex S.A.)
Type of
Total Debt
Liability
Term in years
ThCh$
0 - 90 days
91 days - 1 year
more than 1-2
more than 2-3
more than 3-4
more than 4-5
Préstamos
62,926,918
194,046
724,986
31,247,815
30,760,071
-
-
Préstamos
62,926,918
194,046
724,986
31,247,815
30,760,071
-
-
Préstamos
62,926,920
194,047
724,987
31,247,815
30,760,071
-
-
Préstamos
2,086,272
521,568
-
521,568
521,568
521,568
-
190,867,028
1,103,707
2,174,959
94,265,013
92,801,781
521,568
0
1,629,851,849
23,342,179
44,406,516
52,635,561
52,635,563
52,635,561
52,635,563
Subtotal
Obligaciones con tenedores
de Bonos
de Bonos
Term in days
Bonos
296,507,438
1,495,394
4,984,648
5,981,577
5,981,578
5,981,577
5,981,578
1,926,359,287
24,837,573
49,391,164
58,617,138
58,617,141
58,617,138
58,617,141
Bonos
Subtotal
Banco de Chile
Derivados - Cobertura
20,635,005
1,341,677
1,461,540
1,948,122
1,932,671
1,932,671
1,934,463
Banco Santander - Chile
17,171,168
931,166
1,330,256
1,772,064
1,756,793
1,756,793
1,761,628
Banco Bilbao Vizcaya
Argentaria, Chile
4,308,251
196,644
361,105
480,878
477,305
477,305
479,092
The Bank of Nova Scotia
8,636,537
394,212
723,882
963,985
956,835
956,835
960,410
Corpbanca
2,081,474
94,970
174,490
232,357
230,586
230,586
231,471
JP Morgan Chase Bank, N.A.
21,053,953
1,342,623
1,509,309
2,011,764
1,996,208
1,996,208
1,998,149
Banco de Crédito e Inversiones
16,736,212
1,174,787
1,127,037
1,502,715
1,490,734
1,490,734
1,490,734
90,622,600
5,476,079
6,687,619
8,911,885
8,841,132
8,841,132
8,855,947
Derivados - No Cobertura
54,800
300
54,500
-
-
-
-
Corpbanca
802,100
553,800
248,300
-
-
-
-
Banco del Estado de Chile
498,500
-
498,500
-
-
-
-
HSBC Bank (Chile)
402,900
-
402,900
-
-
-
-
Argentaria, Chile
4,155
4,155
-
-
-
-
-
Banco de Chile
2,340
2,340
-
-
-
-
-
5,940
5,940
-
-
-
-
-
Scotiabank Chile
153,630
153,630
-
-
-
-
-
Banco de Credito del Peru
502,879
-
502,879
-
-
-
-
Scotiabank (Perú)
Subtotal
100,901
100,901
-
-
-
-
-
Subtotal
2,528,145
821,066
1,707,079
0
0
0
0
Consorcio Nacional de Seguros Leasing Financiero
S.A.
3,882,373
247,447
742,343
989,791
989,791
913,001
-
Chilena Consolidada Seguros
de Vida S.A.
Leasing Financiero
884,547
60,310
180,930
241,240
241,240
160,827
-
Banco Bice Leasing Financiero
Leasing Financiero
580,795
45,853
137,556
183,409
183,409
30,568
-
Bice Vida Cía. de Seguros de
Vida S.A.
Leasing Financiero
190,635
25,996
77,987
86,652
-
-
-
5,538,350
379,606
1,138,816
1,501,092
1,414,440
1,104,396
0
298,759,157
298,759,157
-
-
-
-
-
2,514,674,567
329,881,794
56,114,989
157,313,551
155,692,916
63,102,657
61,491,510
Subtotal
Cuentas por pagar Comerciales Crédito Comercial
TOTALES
74
BOOK VALUE
Total Debt
Term in days
Term in years
more than 5
ThCh$
0 - 90 days
91 days - 1 year
more than 1-2
more than 2-3
more than 3-4
more than 4-5
more than 5
-
60,033,073
38,165
-
30,055,616
29,939,292
-
-
-
-
60,033,073
38,165
-
30,055,616
29,939,292
-
-
-
-
60,033,078
38,170
-
30,055,615
29,939,293
-
-
-
-
1,685,249
367,931
-
401,368
437,992
477,958
-
-
0
181,784,473
482,431
0
90,568,215
90,255,869
477,958
0
0
1,351,560,906
1,093,105,833
10,183,287
4,929,844
-
-
-
-
1,077,992,702
266,101,086
171,879,680
-
498,465
-
-
-
-
171,381,215
1,617,661,992
1,264,985,513
10,183,287
5,428,309
0
0
0
0
1,249,373,917
10,083,861
736,352
649,527
86,825
-
-
-
-
-
7,862,468
479,992
270,776
209,216
-
-
-
-
-
1,835,922
85,804
-
85,804
-
-
-
-
-
3,680,378
171,985
-
171,985
-
-
-
-
-
887,014
41,531
-
41,531
-
-
-
-
-
10,199,692
728,102
618,525
109,577
-
-
-
-
-
8,459,471
667,892
667,892
-
-
-
-
-
-
43,008,806
2,911,658
2,206,720
704,938
0
0
0
0
0
-
0
-
-
-
-
-
-
-
-
367,048
367,048
-
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
-
0
-
-
2,038
2,038
-
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,034
4,034
-
-
-
-
-
-
-
114,595
114,595
-
-
-
-
-
-
-
65,514
-
65,514
-
-
-
-
-
-
61,234
61,234
-
-
-
-
-
-
0
614,463
548,949
65,514
0
0
0
0
0
-
3,282,706
162,212
562,129
806,298
876,366
875,701
-
-
-
762,765
45,125
140,985
201,802
218,818
156,035
-
-
-
511,393
35,835
111,903
160,035
173,357
30,263
-
-
-
177,968
22,898
71,238
83,832
-
-
-
-
0
4,734,832
266,070
886,255
1,251,967
1,268,541
1,061,999
0
0
-
298,759,157
298,759,157
-
-
-
-
-
-
1,394,569,712
1,753,790,096
312,446,614
6,586,551
91,820,182
91,524,410
1,539,957
0
1,077,992,702
75
VENCImientos de pasivos financieros al 31.12.2013
NOMINAL VALUES
Total Debt
Type of
Term in days
Term in years
ThCh$
0 - 90 days
91 days - 1 year
more than 1-2
more than 2-3
more than 3-4
more than 4-5
Creditor
Liability
The Bank of Tokyo-Mitsubishi
UFJ, Ltd
Préstamos
54,870,334
270,454
685,150
13,860,675
20,191,242
19,862,813
-
Scotiabank & Trust (Cayman)
Ltd
Préstamos
54,870,333
270,454
685,150
13,860,674
20,191,242
19,862,813
-
Préstamos
54,870,334
270,454
685,150
13,860,675
20,191,242
19,862,813
-
HSBC Bank USA, National
Association
Préstamos
54,870,334
270,454
685,150
13,860,675
20,191,242
19,862,813
-
Banco Santander-Chile
Préstamos
85,305,977
812,578
2,640,173
81,853,226
-
-
-
Claro Infraestructura S.A.
(Telmex S.A.)
Préstamos
493,666
2,468,322
493,664
-
493,665
493,664
493,663
307,255,634
2,388,058
5,380,773
137,789,590
81,258,632
79,944,915
493,666
776,094,918
6,393,684
19,181,053
25,574,737
25,574,738
25,574,737
25,574,738
Banco de Crédito e Inversiones Derivados - Cobertura
0
-
-
-
-
-
-
Banco de Chile
0
-
-
-
-
-
-
Banco de Chile
6,734,832
169,539
513,992
685,323
687,116
683,531
683,532
16,894,123
424,963
1,289,396
1,719,194
1,724,029
1,714,358
1,714,358
0
-
-
-
-
-
-
Argentaria, Chile
Argentaria, Chile
0
-
-
-
-
-
-
6,675,690
168,041
509,480
679,308
681,094
677,521
677,521
6,742,030
169,721
514,541
686,056
687,848
684,263
684,263
Corpbanca
3,258,469
82,009
248,685
331,580
332,466
330,694
330,694
Subtotal
de Bonos
Bonos
40,305,144
1,014,273
3,076,094
4,101,461
4,112,553
4,090,367
4,090,368
Deutsche Bank (Chile)
8,921,279
167,802
8,753,477
-
-
-
-
4,484,082
84,556
4,399,526
-
-
-
-
Banco de Chile
402,180
53,490
348,690
-
-
-
-
Scotiabank Chile
4,596,262
87,977
4,508,285
-
-
-
-
Scotiabank Chile
650,970
78,734
572,236
-
-
-
-
Argentaria, Chile
13,070
12,200
870
-
-
-
-
Corpbanca
2,850
2,850
-
-
-
-
-
HSBC Bank (Chile)
17,615
-
17,615
-
-
-
-
26,360
-
26,360
-
-
-
-
Banco de Crédito e Inversiones Derivados - No Cobertura
130,210
130,210
-
-
-
-
-
5,560
5,560
-
-
-
-
-
Subtotal
Argentaria, Chile
Corpbanca
5,330
5,330
-
-
-
-
-
13,920
13,920
-
-
-
-
-
HSBC Bank (Chile)
13,830
13,830
-
-
-
-
-
Scotiabank Chile
86,320
86,320
-
-
-
-
-
18,568
18,568
-
-
-
-
-
Scotiabank
8,263
2,341
5,922
-
-
-
-
19,396,669
763,688
18,632,981
0
0
0
0
Subtotal
Consorcio Nacional de
Seguros S.A.
Leasing Financiero
4,627,669
234,209
702,628
936,838
936,837
936,837
864,156
Chilena Consolidada Seguros
de Vida S.A.
Leasing Financiero
1,065,558
57,083
171,250
228,334
228,334
228,334
152,223
Banco Bice Leasing Financiero Leasing Financiero
723,318
43,399
130,197
173,596
173,597
173,596
28,933
Bice Vida Cía. de Seguros de
Vida S.A.
Leasing Financiero
278,854
24,605
73,814
98,419
82,016
-
-
Leasing Financiero
1,896,465
474,116
1,422,349
-
-
-
-
8,591,864
833,412
2,500,238
1,437,187
1,420,784
1,338,767
1,045,312
317,703,803
317,703,803
-
-
-
-
-
1,469,348,032
329,096,918
48,771,139
168,902,975
112,366,707
110,948,786
31,204,084
Subtotal
Cuentas por pagar
Comerciales
TOTAL
Crédito Comercial
76
BOOK VALUE
Term in days
Term in years
more than 5
Total Deuda
M$
0 - 90 days
91 days - 1 year
more than 1-2
more than 2-3
more than 3-4
more than 4-5
more than 5
-
51,661,180
31,497
-
12,980,360
19,367,928
19,281,395
-
-
-
51,661,180
31,497
-
12,980,360
19,367,928
19,281,395
-
-
-
51,661,180
31,497
-
12,980,360
19,367,928
19,281,395
-
-
-
51,661,179
31,496
-
12,980,362
19,367,927
19,281,394
-
-
-
79,154,968
49,025
-
79,105,943
-
-
-
-
-
1,913,994
319,021
-
348,130
379,896
414,559
452,388
-
0
287,713,681
494,033
0
131,375,515
77,851,607
77,540,138
452,388
0
648,221,231
519,944,070
-
4,262,456
-
-
-
-
515,681,614
-
1,143,892
-
-
-
-
-
-
1,143,892
61,995
-
-
-
-
-
-
61,995
829,327
-
120,194
-
-
-
-
709,133
3,311,799
8,307,825
330,885
-
302,650
-
-
-
-
28,235
-
1,425,743
-
-
-
-
-
-
1,425,743
-
453,479
-
-
-
-
-
-
453,479
3,282,725
821,183
-
119,173
-
-
-
-
702,010
3,315,338
1,286,008
-
238,724
-
-
-
-
1,047,284
1,602,341
238,220
-
58,217
-
-
-
-
180,003
19,820,028
6,590,732
0
838,958
0
0
0
0
5,751,774
-
8,759,486
27,995
8,731,491
-
-
-
-
-
-
4,403,111
14,106
4,389,005
-
-
-
-
-
-
329,166
8,921
320,245
-
-
-
-
-
-
4,514,981
14,676
4,500,305
-
-
-
-
-
-
527,852
13,133
514,719
-
-
-
-
-
-
7,029
7,029
-
-
-
-
-
-
-
267
267
-
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
44
-
44
-
-
-
-
-
-
117,120
117,120
-
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
11,214
11,214
-
-
-
-
-
-
-
11,848
11,848
-
-
-
-
-
-
-
38,390
38,390
-
-
-
-
-
-
-
18,480
18,480
-
-
-
-
-
-
-
8,042
2,319
5,723
-
-
-
-
-
0
18,747,030
285,498
18,461,532
0
0
0
0
0
16,164
3,818,139
204,984
489,516
702,146
763,162
829,480
828,851
-
-
884,411
39,389
123,065
176,153
191,006
207,111
147,687
-
-
613,122
31,311
97,778
139,834
151,473
164,081
28,645
-
-
251,315
20,157
62,711
89,100
79,347
-
-
-
-
1,831,718
461,361
1,370,357
-
-
-
-
-
16,164
7,398,705
757,202
2,143,427
1,107,233
1,184,988
1,200,672
1,005,183
0
-
317,703,803
317,703,803
-
-
-
-
-
-
668,057,423
1,158,098,021
319,240,536
25,706,373
132,482,748
79,036,595
78,740,810
1,457,571
521,433,388
77
In the case of Other financial liabilities included in the table above, the table below shows the detail of each liability identifying the debtor Group companies, the
related creditor, country of origin and the financial conditions of the liabilities:
Al 31.12.2014
Type of
Effective
Amortization
rate
United States
US$ Deferred annual
2.83%
Libor USD 90D + 1.3%
United States
US$ Deferred annual
2.83%
HSBC Bank USA, National Association
United States
US$ Deferred annual
2.83%
88.381.200-K
Claro Infraestructura S.A. (Telmex S.A.)
Chile
Chile
0-E
Deutsche Bank Trust Company
Americas
United States
Entel S.A.
Chile
97.004.000-5
Banco de Chile
Chile
Entel S.A.
Chile
97.004.000-5
Banco de Chile
Chile
Ch$
-
92.580.000-7
Entel S.A.
Chile
97.036.000-K
Chile
Ch$
92.580.000-7
Entel S.A.
Chile
97.032.000-8
Banco Bilbao Vizcaya Argentaria, Chile
Chile
92.580.000-7
Entel S.A.
Chile
0-E
92.580.000-7
Entel S.A.
Chile
97.023.000-9
92.580.000-7
Entel S.A.
Chile
92.580.000-7
Entel S.A.
92.580.000-7
Debtor's
Creditor's
Creditor
Debtor
Country
92.580.000-7
Entel S.A.
Chile
0-E
The Bank of Tokyo-Mitsubishi UFJ, Ltd
92.580.000-7
Entel S.A.
Chile
0-E
92.580.000-7
Entel S.A.
Chile
0-E
92.580.000-7
Entel S.A.
Chile
92.580.000-7
Entel S.A.
92.580.000-7
92.580.000-7
Tax ID
Tax ID
Country Currency
Nominal rate
Annual
9.12%
8.70%
US$ Deferred annual
5.09% - 4.88%
4.874% / 4.75%
UF Deferred annual
3.51%
3.50%
-
-
-
-
-
Ch$
-
-
-
Canada
Ch$
-
-
-
Corpbanca
Chile
Ch$
-
-
-
0-E
United States
Ch$
-
-
-
Chile
97.006.000-6
Chile
Ch$
-
-
-
Entel S.A.
Chile
97.006.000-6
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.023.000-9
Corpbanca
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.030.000-7
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.951.000-4
HSBC Bank (Chile)
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.032.000-8
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.004.000-5
Banco de Chile
Chile
Ch$
-
-
-
92.580.000-7
Entel PCS S.A.
Chile
97.030.000-7
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.018.000-1
Scotiabank Chile
Chile
Ch$
-
-
-
0-E
Entel Perú
Perú
0-E
Peru
PEN
-
-
-
0-E
Entel Perú
Perú
0-E
Scotiabank (Perú)
Peru
PEN
-
-
-
92.580.000-7
Entel S.A.
Chile
99.012.000-5
Consorcio Nacional de Seguros S.A.
Chile
UF
Monthly
8.03%
8.03%
92.580.000-7
Entel S.A.
Chile
99.185.000-7
Chilena Consolidada Seguros de Vida S.A.
Chile
UF
Monthly
8.43%
8.43%
92.580.000-7
Entel S.A.
Chile
97.080.000-K
Chile
UF
Monthly
8.32%
8.32%
92.580.000-7
Entel S.A.
Chile
96.656.410-5
Bice Vida Cía. de Seguros de Vida S.A.
Chile
UF
Monthly
7.52%
7.52%
78
UF
Al 31.12.2013
Debtor's
Tax ID
Debtor
Country
Creditor's
Tax ID
Creditor
Country Currency
Type of
Effective
Amortization
rate
Nominal rate
92.580.000-7
Entel S.A.
Chile
0-E
The Bank of Tokyo-Mitsubishi UFJ, Ltd (deal)
United States
US$ Deferred annual
2.83%
92.580.000-7
Entel S.A.
Chile
0-E
Scotiabank & Trust (Cayman) Ltd (deal)
United States
US$ Deferred annual
2.83%
92.580.000-7
Entel S.A.
Chile
0-E
United States
US$ Deferred annual
2.83%
92.580.000-7
Entel S.A.
Chile
0-E
HSBC Bank USA, National Association
United States
US$ Deferred annual
2.83%
92.580.000-7
Entel S.A.
Chile
97.036.000-K
Banco Santander-Chile
Chile
Ch$ Deferred annual
TAB Ch$ 30
dias
TAB CLP 30 dias - 50
bps
92.580.000-7
Entel S.A.
Chile
88.381.200-K
Claro Infraestructura S.A. (Telmex S.A.)
Chile
92.580.000-7
Entel S.A.
Chile
0-E
Deutsche Bank Trust Company Americas
United States
92.580.000-7
Entel S.A.
Chile
97.006.000-6
Chile
UF
92.580.000-7
Entel S.A.
Chile
97.004.000-5
Banco de Chile
Chile
UF
92.580.000-7
Entel S.A.
Chile
97.004.000-5
Banco de Chile
Chile
92.580.000-7
Entel S.A.
Chile
97.036.000-K
92.580.000-7
Entel S.A.
Chile
97.036.000-K
92.580.000-7
Entel S.A.
Chile
92.580.000-7
Entel S.A.
92.580.000-7
UF
Annual
9.12%
8.70%
US$ Deferred annual
5.02%
4.88%
-
-
-
-
-
-
Ch$
-
-
-
Chile
Ch$
-
-
-
Chile
UF
-
-
-
97.032.000-8
Chile
UF
-
-
-
Chile
97.032.000-8
Chile
Ch$
-
-
-
Entel S.A.
Chile
0-E
United States
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.023.000-9
Corpbanca
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
96.929.050-2
Deutsche Bank (Chile)
Chile
UF
Deferred annual
-
-
92.580.000-7
Entel S.A.
Chile
97.036.000-K
Chile
UF
Deferred annual
-
-
92.580.000-7
Entel S.A.
Chile
97.004.000-5
Banco de Chile
Chile
Ch$
Deferred annual
-
-
92.580.000-7
Entel S.A.
Chile
97.018.000-1
Scotiabank Chile
Chile
UF
Deferred annual
-
-
92.580.000-7
Entel S.A.
Chile
97.018.000-1
Scotiabank Chile
Chile
Ch$
Deferred annual
-
-
92.580.000-7
Entel S.A.
Chile
97.032.000-8
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.023.000-9
Corpbanca
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.951.000-4
HSBC Bank (Chile)
Chile
Ch$
-
-
-
92.580.000-7
Entel S.A.
Chile
97.043.000-8
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.006.000-6
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.032.000-8
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.023.000-9
Corpbanca
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97..030.000-7
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.951.000-4
HSBC Bank (Chile)
Chile
Ch$
-
-
-
96.806.980-2
Entel PCS S.A.
Chile
97.018.000-1
Scotiabank Chile
Chile
Ch$
-
-
-
0-E
Nextel Perú
Perú
0-E
Banco de Crédito del Peru
Peru
PEN
-
-
-
0-E
Nextel Perú
Perú
0-E
Scotiabank
Peru
PEN
-
-
-
92.580.000-7
Entel S.A.
Chile
99.012.000-5
Consorcio Nacional de Seguros S.A.
Chile
UF
Monthly
8.03%
8.03%
92.580.000-7
Entel S.A.
Chile
99.185.000-7
Chilena Consolidada Seguros de Vida S.A.
Chile
UF
Monthly
8.43%
8.43%
92.580.000-7
Entel S.A.
Chile
97.080.000-K
Chile
UF
Monthly
8.32%
8.32%
92.580.000-7
Entel S.A.
Chile
96.656.410-5
Bice Vida Cía. de Seguros de Vida S.A.
Chile
UF
Monthly
7.52%
7.52%
0-E
Nextel Perú
Perú
0-E
Peru
US$
Monthly
7.27%; 8%
7.4%; 8%
Liquidity risks are controlled through the financial planning which considers debt policies and possible sources of financing from third parties. The low indebtedness level of the Group companies as well as access to domestic and international financing though bank borrowings and the placement of debt securities allow
discarding long-term liquidity risks, except for those related to systemic alterations in financial markets.
79
The maturity schedules above include different liabilities related to finance lease agreements, whose specific maturity profiles in ThCh$, are as follows:
Minimum lease payments
12.31.2014
12.31.2013
Gross
Interest
Present value
Gross
Interest
Present value
362,114
(96,044)
266,070
874,494
(117,292)
757,202
Between 90 days and 1 year
1,138,816
(252,561)
886,255
2,464,278
(320,851)
2,143,427
Between 1 and 2 years
1,501,092
(249,124)
1,251,968
1,437,188
(329,955)
1,107,233
1,414,440
(145,900)
1,268,540
1,420,784
(235,796)
1,184,988
1,104,395
(42,396)
1,061,999
1,339,055
(138,383)
1,200,672
-
-
-
1,045,023
(39,840)
1,005,183
5,520,857
(786,025)
4,734,832
8,580,822
(1,182,117)
7,398,705
Between 1 and 90 days
Total
The parent has two contracts for the issuance of dematerialized, bearer Securities Line Bonds with terms of 10 and 30 years, respectively.
The bond issue contracts represent an alternative source of financing to be used when favorable market and economic conditions for bond issue exist.
17. TRADE AND OTHER PAYABLES
Trade and other payables are as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
Trade payables
Foreign correspondents
2,805,512
3,796,293
Telecommunication suppliers
29,933,923
34,604,898
Foreign suppliers
42,433,029
42,326,450
400,747,110
329,263,114
Employee benefits
22,702,560
22,853,276
Dividends payable
1,188,073
10,500,255
Domestic suppliers
Other payables
Others (Value Added Tax debit and withholding taxes)
Total
29,199,205
23,185,063
529,009,412
466,529,349
Comparative information of trade payables to suppliers for invoices (excluding accruals) is presented below. The Entel Group’s companies record no past due debt
in both periods:
Current trade accounts by
expiring date
31.12.2014
Goods
Services
31.12.2013
Total
Goods
ThCh$
Services
Total
ThCh$
Up to 30 days
65,507,197
83,494,104
149,001,301
58,640,332
114,954,000
173,594,332
37,751,284
64,362,525
102,113,809
28,282,134
38,570,788
66,852,922
6,883,394
40,760,653
47,644,047
25,536,960
51,719,589
77,256,549
110,141,875
188,617,282
298,759,157
112,459,426
205,244,377
317,703,803
Total
The approximate average payment period is 76.57 days.
80
18. OTHER PROVISIONS
Provisions are as follows:
31.12.2014
31.12.2013
ThCh$
ThCh$
Other provisions
180,492
153,974
Total Current Provisions
180,492
153,974
Current Provisions
Non-current Provisions
Dismantling, restoration and rehabilitations costs
19,596,432
13,370,970
Total Non-current Provisions
19,596,432
13,370,970
At December 31, 2014 and 2013, changes in these provisions are as follows:
Total Provision, Opening Balance (01.01.2014)
Dismanteling and rehabilitation costs
Other provisions
Total
ThCh$
ThCh$
ThCh$
13,370,969
153,975
13,524,944
Increase (Decrease) in existing provisions
4.380,476
5,075
4,385,551
Increase for adjustment of time-value of money
1,044,431
-
1,044,431
Increase (decrease) in foreign currency translation
582,461
12,729
595,190
218,095
8,713
226,808
Changes in provisions, Total
6,225,463
26,517
6,251,980
19,596,432
180,492
19,776,924
Dismanteling and rehabilitation costs
Other provisions
Total
Total provision, Closing balance (12.31.2014)
ThCh$
ThCh$
ThCh$
6,108,241
1,396,700
7,504,941
419.879
577,198
997,077
Increase in business combination
6,079,187
262,814
6,342,001
Provision used
(239,008)
(1,972,700)
( 2,211,708 )
-
(119,526)
( 119,526 )
Increase for adjustment of time-value of money
762,466
-
762,466
Increase (decrease) in foreign currency translation
201,353
8,718
210.071
38.851
770
39.621
Changes in provisions, Total
7.262.728
(1.242.726)
6.020.002
13.370.969
153.974
13.524.943
Total Provision, Opening Balance (01.01.2013)
Increase (Decrease) in existing provisions
Reverse of unused provision
Total provision, Closing balance (12.31.2013)
The determination of the provision for restoration and rehabilitation costs considers the estimated value for the construction, demolition or any other unavoidable
activity. These costs are discounted based on estimated validity periods of contracts maintained with the owners of the properties or facilities where the premises
are located considering the termination and renewal hypotheses. These amounts are discounted at each company’s capital cost rates.
81
19. OTHER NON-FINANCIAL LIABILITIES
At December 31, 2014 and 2013, other non-financial liabilities are as follows.
Current
Non-current
12.31.2014
12.31.2013
12.31.2014
12.31.2013
ThCh$
ThCh$
ThCh$
ThCh$
11,375,984
11,819,270
-
-
6,719,657
6,223,383
-
-
-
-
7,567,986
4,395,972
4,989,079
1,500,651
-
1,081,786
Deferred revenue
Prepayment cards
Services previously invoiced
Customer loyalty programs
Transfer of networks
Lease of underwater cables
337,045
318,426
795,941
Unused prepait govermment grants
136,036
136,036
350,706
486,743
-
-
278,263
385,599
23,557,801
19,997,766
8,992,896
6,350,100
Other deferred liabilities
Total
20. EMPLOYEE BENEFITS
a) Personnel expenses
Salaries
Short-term employee benefits
Post-employment benefits
Termination benefits
Other personnel expenses
Total
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
165,671,014
121,579,941
14,447,895
12,744,392
792,414
(803,402)
9,978,163
12,650,081
31,335,389
26,147,240
222,224,875
172,318,252
b) Severance payment (Post-employment and termination benefits)
The Parent Company maintains the most significant agreements in relation to severance payments payable to its employees and executives.
The right to receive this benefit as well as the determination of the amount payable is regulated by the existing agreements considering such relevant factors as the
number of years of service, permanence and salary.
The benefit in favor of employees is provided through Corporación Mutual Entel Chile which is financed in a shared manner. Employees provide a monthly contribution of 2.66% of their base salaries and the Company pays the balances that might possibly be required to complete the payment of a number of severance
payments of up to 3% of its employees.
As of December 31, 2014 and 2013, liabilities recognized designated as post-employment benefits amount to ThCh$10,226,233 and ThCh$7,862,489, respectively,
and represent the present value of accrued severance indemnity payments at such dates, deducting the amounts held by the Mutual.
82
Movements in the Parent’s severance payment (post-employment) benefits are detailed as follows:
Transaction
31.12.2014
31.12.2013
ThCh$
ThCh$
Present value of the obligation, opening balance
7,862,489
7,934,618
Cost of current service
1,407,256
972,036
370,096
523,685
Interest cost of the obligation
Acturial gains and losses arinsing on the difined benefit obligation
1,201,234
207,588
Contributions paid to Plan
( 614,842 )
( 1,775,438 )
10,226,233
7,862,489
31.12.2014
31.12.2013
Discount rate
4.80%
6.60%
Salary increase rate
1.00%
1.00%
13.8%; 5.5%; 7%
13.8%; 5.5%; 7%
RV-2004
RV-2004
Present value of the obligation, closing balance
Personnel turnover rate
Mortality table
21. CAPITAL AND RESERVES
Changes in equity accounts at December 31, 2014 and 2013 are detailed in the Statement of Changes in Equity.
Share capital
The Company’s outstanding shares are same series shares with no par value and fully paid. These shares represent the Company’s authorized share capital.
Series
Single
Outstanding shares
Paid shares
Voting shares
Suscribed capital
Paid capital
236,523,695
236,523,695
236,523,695
522,667,566
522,667,566
Between January 1, 2013 and December 31, 2014, there are no movements related to issues, redemptions, payments, decreases or any other circumstances.
There are no treasury shares.
There are no reserves or any commitments for the issue of shares to cover option and sale agreements.
Retained (loss) Earnings
During the years 2014 and 2013, retained earnings decreased by ThCh$18,921,896 and ThCh$44,089,576, respectively. These amounts relate to provisional dividends granted in periods, plus the provision for payment of dividends which is intended to pay the minimum mandatory dividend established by law.
The provision accrued in 2013 to distribute minimum dividends represents Ch$36,41 per share.
In addition and due to the Tax Reform which, among other things, gradually increases the corporate income tax rate beginning in 2014, the SVS established the
criteria that the effect on deferred tax assets and liabilities, should be recognized in equity in the caption the retained earnings and not profit or loss which differs
from that established in the IFRS. This resulted in an increase in retained earnings of ThCh$9,864,071 for companies belonging to the Entel Group companies.
83
Dividend Policy
Pursuant to Law No. 18.046, except for any different unanimous agreement reached at shareholders meetings, publicly traded companies must pay annual dividends of at least 30% of the profit for the period.
The Group’s dividend distribution policy currently in force sets dividend limits exceeding legal minimum amounts. However, the Group’s policy establishes maximum
amounts and, accordingly, the discretionary criterion is applied for possible dividends exceeding the maximum legal amount. As a result, no provisions for dividends
additional to the minimum legal requirement were accrued.
The policy communicated at the Ordinary Shareholders’ meeting held on April 25, 2013 approved changing the maximum for dividend distribution from 80% to 50%
of profit for each period depending on the Company’s profit for the period, investment needs and safeguards established in long-term loan agreements entered into
by the Company in relation to debt, liquidity and financing issues.
As required by the Superintendence of Securities and Insurance, the Parent established a policy regarding the treatment of the effects resulting from adjustments of
financial assets and liabilities at fair value. In line with this, the Group has established as policy to reduce from the profit to be used to pay dividends the unrealized
gains resulting from adjustments to fair value.
Except for the conditions indicated in the preceding paragraphs, the Company is not subject to any additional restrictions to the payment of dividends.
Dividends paid:
Durante el año 2013 y 2014, se distribuyeron los siguientes dividendos:
During the periods 2014 and 2013, the Group has paid the following dividends:
At the Board of Directors’ Meeting held on November 3, 2014, the directors agreed to distribute a provisional dividend of Ch$80 per share (equivalent to
ThCh$18,921,896). This dividend was paid beginning from December 11, 2014.
At the Ordinary Shareholders’ Meeting held on April 29, 2014, the shareholders agreed to distribute a final dividend of Ch$150 per share (equivalent to
ThCh$35,478,554). This dividend was paid beginning from May 28, 2014.
At the Board of Directors’ Meeting held on November 4, 2013, the directors agreed to distribute a provisional dividend of Ch$150 per share (equivalent to
ThCh$35,478,554). This dividend was paid beginning from December 12, 2013.
At the Ordinary Shareholders’ Meeting held on April 25, 2013, the shareholders agreed to distribute a final dividend of Ch$225 per share (equivalent to
ThCh$53,217,831). This dividend was paid beginning from May 16, 2013.
Other reserves:
Other reserves included in the Statement of Changes in Equity are as follows:
Translation reserves: Reflects accumulated gains or losses resulting from the translation of the financial statements of foreign subsidiaries from their functional
currency to the Group’s presentation currency (Chilean pesos).
Cash flows hedge reserve: Corresponds to the difference between carrying amount and the fair value of cash flow hedge contracts qualified as effective hedges, net
of deferred taxes. These amounts are transferred to profit or loss as contracts mature.
Other reserves: Credits and debits to equity in relation to adjustments required due to the first time application of International Financial Reporting Standards (IFRS)
at January 1, 2008.
84
Main balances related to such adjustments relate to unrecognized deferred tax liabilities of ThCh$10,866,212 and advances from customers of ThCh$8,215,281.
In addition, in accordance with Article 10 of Law No. 18.046 and Official Letter No. 456 of the Superintendence of Securities and Insurance, price-level adjustment
on paid-in capital is also recorded within Other reserves.
22. EARNINGS PER SHARE
Earnings per share are as follows:
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
Profit (loss) atributable to owners the parent
56,470,502
146,965,254
Profit (loss) atributable to ordinary shareholders, basic
56,470,502
146,965,254
236,523,695
236,523,695
238.75
621.36
Weighted average number of shares, basic
Basic earnings (losses) per share
The calculation of basic earnings per share for the periods 2014 and 2013 was based on the profit attributable to shareholders and the number of single-series
shares. The Group has issued no convertible notes or other equity securities. Therefore, there are no potentially dilutive effects on the Group’s earnings per share.
23. REVENUE AND EXPENSES
a) Revenue
The Group’s revenue relates mainly to the rendering of services; sales of goods are not significant and supplement the services rendered, which are detailed as
follows:
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
Mobile telephone service - Chile
1,150,532,126
1,271,725,443
Mobile telephone service - Peru
151,729,044
45,902,463
Private services (including IT services)
136,841,741
120,662,870
Local telephone services (including NGN - IP)
50,568,484
43,159,952
Television service
18,019,728
8,337,016
Long distance
26,961,096
32,027,145
Internet
24,096,915
20,878,508
22,987,879
20,867,959
Traffic business
28,080,318
31,254,738
Americatel Peru
25,449,601
21,391,728
Call center and other
Total revenue
8,000,453
12,167,683
1,643,267,385
1,628,375,505
85
b) Other revenues
At December 31, 2014 and 2013, other revenue is as follows:
Revenue from commercial interest
Revenue from leases
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
1,508,798
2,208,272
11,220,900
8,724,245
Refund for stolen or lost handsets
3,690,894
-
Other revenue
2,382,156
2,188,158
18,802,748
13,120,675
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
(127,850,977 )
(220,110,564 )
(45,873,259 )
(40,321,695 )
Advertising, sale fees and expenses
(485,787,732 )
(412,323,923 )
Lease and maintenance
(194,671,147 )
(149,178,095 )
Other
(169,988,815 )
(134,202,564 )
(1,024,171,930)
(956,136,841)
Total other revenue
c) Other expenses
At December 31, 2014 and 2013, other expenses is as follows:
Access charges and profit share to correspondents
Outsourcing and materials
Total other expenses
86
d) Finance income and finance costs
At December 31, 2014 and 2013, finance income and finance costs are as follows:
Interest on time deposits - Loans and receivables
Interest on finance leases
Rate derivatives - Not designated as hedges
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
4,229,166
1,640,264
278,293
306,622
6,311,246
-
10,818,705
1,946,886
Interest expenses, loans - liabilities at amortized cost
(1,491,015)
(7,309,545)
Interest expenses, bonds - liabilities at amortized cost
(42,305,400)
(4,878,662)
Amortization of expenses for loan agreements
(2,936,177)
(3,575,871)
Exchange and interest rate hedges (CCS)
(3,735,921)
(1,576,781)
Interest rate derivatives – not designated as hedges
(882,734)
(1,188,974)
Interest expenses on finance leases
(428,962)
(472,036)
Interest expenses on post-employment benefits
(370,096)
(523,685)
Interest expenses, Other
(1,251,089)
(908,215)
Other finance costs
(1,851,391)
(404,449)
Total finance costs
(55,252,785)
(20,838,218)
Total finance costs, Net
(44,434,080)
(18,891,332)
Total finance income
The net finance cost includes the following interest in relation to assets and liabilities not measured at fair value through profit or loss:
Total Income from Interest on Financial Assets
Total Costs from Interest on Financial Liabilities
4,507,459
1,946,886
(50,634,130)
(18,072,463)
87
24. ASSETS AND LIABILITIES IN FOREIGN CURRENCY
Assets and liabilities in foreign currency are as follows:
Assets
Currency
Current trade and other receivables
31.12.2014
Balances not discounted based on maturity
ThCh$
1 - 90 days
91 days - 1 year
more than 5 years
US$
115,504,582
115,504,582
-
-
PEN
2,280,631
2,280,631
-
-
Euro
7,310
7,310
-
-
US$
442,630,082
191,382,248
251,247,834
-
Euro
2,218,590
2,218,590
-
-
PEN
2,148,041
2,148,041
-
-
US$
197,269
197,269
-
-
PEN
3,456,546
3,456,546
-
-
-
-
-
US$
12,182,835
12,120,511
62,324
-
PEN
18,237,749
18,237,749
-
-
Euro
2,211,610
2,211,610
-
-
Inventories
PEN
54,426,778
54,426,778
-
-
Current tax assets
PEN
41,822,907
41,822,907
-
-
US$
864,618,750
-
-
864,618,750
Intangible assets
PEN
117,324,109
-
-
-
PEN
284,672,077
-
-
-
Deferred tax assets
PEN
132,658,750
-
-
-
2,096,598,616
-
-
-
US$
1,435,133,518
-
-
-
PEN
657,027,588
-
-
-
Euro
4,437,510
-
-
-
Total Assets in Foreign Currency
Liabilities
Currency
31.12.2014
US$
19,609,735
17,506,528
2,103,207
-
PEN
2,881,159
1,782,284
1,098,875
-
US$
174,049,292
174,049,292
-
-
-
-
Euro
3,271,098
3,271,098
-
-
-
-
PEN
48,593,355
48,593,355
-
-
-
-
US$
1,260,852,153
-
-
182,938,890
-
PEN
7,610,727
7,408,506
202,221
-
Non-current provisions
PEN
11,390,142
-
-
-
-
-
PEN
11,819,249
-
-
-
-
-
US$
12,808
-
-
-
-
-
PEN
278,185
-
-
-
-
-
ThCh$
Total Liabilities in Foreign Currency
88
1 - 90 days 91 days - 1 year
1 - 3 years
3 - 5 years more than 5 years
-
-
1,077,913,263
-
1,540,367,903
-
-
-
US$
1,454,523,988
-
-
-
-
-
PEN
82,572,817
-
-
-
-
-
Euro
3,271,098
-
-
-
-
-
Assets
Currency
31.12.2013
1 - 3 years
more than 5 years
US$
2,993,931
2,993,931
-
-
-
PEN
1,453,099
1,453,099
-
-
-
Euro
7,376
7,376
-
-
-
US$
396,731,590
157,277,662
239,453,928
-
-
Euro
2,172,900
-
2,172,900
-
-
ThCh$
US$
44,388
44,388
-
-
-
PEN
43,923
43,923
-
-
-
US$
24,129,657
21,447,634
2,682,023
-
-
PEN
2,693,172
2,693,172
-
-
-
Euro
2,167,347
2,167,347
-
-
-
Inventories
PEN
27,360,687
27,360,687
-
-
-
Current tax assets
PEN
13,983,103
13,081,604
901,499
-
-
US$
392,932,890
-
-
392,932,890
-
Intangible assets
PEN
109,787,565
-
-
-
-
PEN
125,429,503
-
-
-
-
Deferred tax assets
PEN
81,798,795
-
-
-
-
Current trade and other receivables
Total Assets in Foreign Currency
1,183,729,926
-
US$
816,832,456
-
-
-
-
PEN
362,549,847
-
-
-
-
Euro
4,347,623
-
-
-
-
Liabilities
Currency
31.12.2013
1 - 3 years
3 - 5 years
more than 5 years
US$
10,633,860
461,362
10,172,498
-
-
-
US$
80,074,303
80,074,303
-
-
-
-
Euro
2,581,703
2,581,703
-
-
-
-
PEN
1,986,514
1,986,514
-
-
-
-
US$
721,806,289
-
-
721,806,289
-
-
PEN
7,241,180
-
-
7,241,180
-
-
US$
124,868
-
-
-
-
-
PEN
6,578,336
-
-
-
-
-
ThCh$
Non-current provisions
PEN
534,514
-
-
-
-
-
US$
385,526
-
-
-
-
-
831,947,093
-
-
-
-
-
Total Liabilities in Foreign Currency
US$
813,024,846
-
-
-
-
-
PEN
16,340,544
-
-
-
-
-
Euro
2,581,703
-
-
-
-
-
At December 2014 and 2013, the Group companies maintained derivatives to hedge against exchange rate fluctuations (foreign currency forwards) and swaps to
hedge debt in U.S. dollars at variable interest rates related to obligations in UF at fixed interest (Cross Currency Swap - CCS). The tables above include only the
foreign currency component in these contracts.
89
25. FOREIGN CURRENCY TRANSLATION AND RESULTS FROM INFLATION-ADJUSTED UNITS
At December 31, 2014 and 2013, this item is as follows:
01.01.2014
01.01.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
Other assets
13,567,942
2,872,172
(7,184,140)
(2,150,026)
(143,619,000)
(44,631,000)
Derivative instruments, closing exchange rate effect (FW)
50,380,141
40,387,531
Derivative instruments, closing exchange rate effect (CCS)
86,987,949
4,338,868
(11,218,359)
(21,459,151)
(216,601)
(458,239)
Interest-bearing borrowings
Derivative instruments, fair value effect (FW)
Derivative instruments, fair value effect (CCS)
Other liabilities
Total foreign currency translation differences
59,000
21,643
(11,243,068)
(21,078,202)
1,311,608
868,058
(23,544,569)
(1,582,468)
Results from inflation-adjusted units
Other assets
Derivative instruments - closing exchange rate effect (CCS)
Other liabilities
Total result from inflation-adjusted units
(402,671)
(436,031)
(22,635,632)
(1,150,441)
26. OPERATING LEASES
The main operating lease agreements acting as lessee relate to leases and rights of use of urban and rural real estate for the location of technical nodes.
Expense from property lease
01.01.2014
01.01.2013
31.12.2014
31.12.2013
62,815,267
48,194,110
In addition, this caption includes expenses related to telecommunication signal transmission, data and other, which amounts amounted to ThCh$43,068,255 and
ThCh$35,861,613 during the year 2014 and 2013, respectively.
Future commitments are as follows:
GASTO DE ARRIENDOS DE PROPIEDADES
Up to one year
From one to five years
segmento satelital, tramas, cables submarinos y otros
Up to one year
90
31.12.2014
31.12.2013
M$
M$
72,472,801
59,528,601
181,020,475
162,912,359
31,12,2014
31,12,2013
M$
M$
66,632,696
55,771,495
153,474,080
143,285,042
Operating leases acting as lessor relate to agreements associated with the business of leasing networks to other telecommunication and datacenter service operators (housing, hosting, virtual servers, etc.).
COBROS MÍNIMOS FUTUROS
31,12,2014
31,12,2013
M$
M$
Up to one year
14,363,169
9,042,670
29,522,278
18,530,276
01.01.2014
01.01.2013
31.12.2014
31.12.2013
M$
M$
11,220,900
9,537,023
Lease payments recognized in profit or loss
At December 31, 2014, no contingent rents are pending receipt.
27. INFORMACION FINANCIERA POR SEGMENTOS
The Group has very developed management control systems, which allow having separate financial information with high disaggregation levels for making decisions about allocation of services and performance evaluation.
In line with the Group’s organizational structure, the following operating segments have been defined for reporting purposes based on their related revenue levels:
“People”, “Small and Medium Enterprises”, “Corporations”, “Peru Mobile Telephone Peru” and “All other segments”.
The factors used to identify each segment are related to separate operating functions for each market segment regarding product development and innovation,
prices, marketing, sales and client service. In addition, each segment’s requirements over the common technical and shared services infrastructure is also taken
into account.
Each segment defined generates revenues and expenses on which there is separate information periodically assessed by those in charge of making decisions
regarding the allocation of resources and performance evaluation.
Operating segment information (unaudited) for the years ended December 31, 2014 and 2013, is as follows:
91
Profit or loss, assets and liabilities as of 12.31.14, ThCh$
Segment
Revenues
Other significant revenue (expense) items
Reportable segment revenue (EBITDA)
Depreciation, amortization and impairment
Reportable segment revenue (EBIT)
Consumer
SMEs
Corporations
Mobile Peru
Other
Unallocated
Withdrawals
895,081,708
296,488,165
211,283,216
157,552,715
433,833,292
-
(350,971,711)
1,643,267,385
(631,517,372)
(198,766,264)
(155,174,857)
(267,071,757)
(371,200,023)
-
350,612,910
(1,273,117,363)
263,564,336
97,721,901
56,108,359
(109,519,042)
62,633,269
(110,710,928)
(49,249,453)
(49,102,306)
(22,487,298)
(12,263,372)
152,853,408
48,472,448
7,006,053
(132,006,340)
50,369,897
Total Group
(358,801)
370,150,022
-
432,632
(243,380,725)
126,769,297
-
73,831
Interest revenue
10,818,705
-
10,818,705
Interest expenses
(55,252,785)
-
(55,252,785)
Foreign currency translation differences and result from inflationindexed units
(33,804,869)
(73,831)
(33,878,700)
8,013,985
-
Income tax income (expense)
Total reportable segment revenue
8,013,985
56,470,502
Assets
3,035,795,403
Increase in current assets
21,877,867
29,342,080
46,432,554
169,823,722
9,162,965
Liabilities
3,035,795,403
238,134,143
514,773,331
2,079,450,541
2,079,450,541
Equity
956,344,862
Liabilities and equity
3,035,795,403
Impairment losses recognized in profit or loss
35,429,209
8,946,983
2,758,997
6,179,970
1,935,184
Cash flows used in operating activities
Cash flows used in investment activities
Cash flows used in financing activities
Profit or loss, assets and liabilities as of 12.31.13, ThCh$
-
55,250,343
472,141,967
472,141,967
(542,107,715)
(542,107,715)
407,041,125
407,041,125
Segment
Revenues
Consumer
SMEs
Corporations
Mobile Peru
Other
Unallocated
Withdrawals
997,618,309
310,955,898
203,572,008
48,126,765
326,574,520
-
(258,471,995)
1,628,375,505
(747,498,672)
(240,898,363)
(148,607,427)
(59,160,115)
(223,303,481)
-
258,408,216
(1,161,059,842)
(63,779)
467,315,663
101,268
(249,278,733)
37,489
218,036,930
250,119,637
70,057,535
54,964,581
(11,033,350)
103,271,039
(129,965,483)
(50,390,242)
(39,763,784)
(6,329,588)
(22,930,904)
120,154,154
19,667,293
15,200,797
(17,362,938)
80,340,135
Interest revenue
-
Total Group
1,946,886
1,946,886
Interest expenses
(20,838,218)
(20,838,218)
Foreign currency translation differences and result from inflationindexed units
(22,191,154)
Income tax income (expense)
(29,951,701)
(29,951,701)
2,256,949,998
2,256,949,998
Total reportable segment revenue
(37,489)
(22,228,643)
146,965,254
Assets
Increase in current assets
22,077,273
33,772,718
76,528,895
15,254,929
66,909,815
Liabilities
209,204,404
423,748,034
1,375,864,886
1,375,864,886
Equity
881,085,112
Liabilities and equity
2,256,949,998
Impairment losses recognized in profit or loss
37,057,122
Cash flows used in operating activities
Cash flows used in investment activities
Cash flows used in financing activities
92
9,169,742
3,417,875
851,669
1,775,283
-
52,271,691
400,322,042
400,322,042
(692,587,950)
(692,587,950)
249,513,582
249,513,582
General Information on Profit or loss as of
Segment
12,31,2013 in ThCh$, Restated
Revenues
Consumer
SMEs
Corporations
Mobile Peru
Withdrawals
Total Group
997,618,309
310,955,898
203,572,008
48,126,765
326,574,520
Other Unallocated
-
(258,471,995)
1,628,375,505
(688,963,909)
(226,829,315)
(145,344,069)
(59,160,115)
(299,170,650)
-
258,408,216
(1,161,059,842)
308,654,400
84,126,583
58,227,939
(11,033,350)
27,403,870
(63,779)
467,315,663
(138,060,652)
(52,335,945)
(40,215,096)
(6,329,588)
(12,438,720)
101,268
(249,278,733)
170,593,748
31,790,638
18,012,843
(17,362,938)
14,965,150
37,489
218,036,930
-
No operations have been discontinued during the periods 2014 and 2013.
The reportable segment “People” relates to natural persons who are the final users of the services and equipment provided.
The reportable segment “Small and Medium Enterprises” generally relates to legal entities in which the goods and services acquired are used in productive processes or traded.
The reportable segment “Corporations” has characteristics similar to those of Small and Medium Enterprises but relates to larger companies, government entities,
banks and all kind of large companies.
The reportable segment “Mobile Telephone Peru” relates to services provided by the subsidiary Nextel Perú S.A., acquired in August of 2013 (see note 13.1).
The reportable segment “Other Business” relates mainly to network infrastructure services provided to other domestic as well as foreign telecommunication services providers. Such network leases included intercompany transactions with their respective allocation for each segment. This allocation ceased in March 2014.
For comparative purposes, at an operating profit level, segmented information reported in December 2013 has been r.
This segment also includes the operations of subsidiaries providing call center services both in Chile and abroad as well as the Group’s operations in Peru, which
include the provision of corporation services, long distance and traffic services provided by Americatel Perú.
Foreign operations conducted by the Group’s subsidiaries in Peru generated revenue for ThCh$179,892,222 and ThCh$72,044,232 and during the years 2014 and
2013, which are equivalent to 10.9% and 4% of the Company’s revenue for the related periods.
Inter-segment transactions are stated at market prices which usually correspond to prices for sale to third parties.
Due the Group’s business and financing, finance costs are not allocated.
The results of reportable segments are determined at different levels with those at Ebitda level being the most significant because its components include mainly
directly related allocations.
The allocation of revenues and expenses to each operating segment considers existing correlations among them and with assets and liabilities; therefore, no mismatching allocations occur.
The Entel Group provides mobile telecommunication services including voice, added value, data, broadband and mobile internet services as well as fixed network
services basically focused on providing integrated solutions including data network, local telephony, Internet access, long distance public telephony, information
technology integration services (data center, BPO and operating continuity) lease of networks and wholesale traffic businesses. The Group also provides call center
services for the corporate market and Group companies.
.
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These businesses are conducted mainly in Chile. Businesses abroad are carried out by two subsidiaries operating in Perú which provide fixed network and call
center services. From September 2013, Entel Peru was included to the Group offering mobile telephone services.
At Group level, there are no clients concentrating significant revenue percentages. The analysis of invoices does not consider invoices issued to intermediaries for
the magnetic charge of prepaid mobile telephone services.
28. CAPITAL MANAGEMENT
Capital needs required to fund investments are satisfied using own resources arising from the issue of shares and the withholding of benefits as well as resources
arising from long-term borrowings with third parties.
According to the established policies, the level of indebtedness can reach a maximum of the greater of the following ratios: i) (Financial Debt - Cash)/Equity plus
non-controlling interests, ratio equal to 1.5 times, or ii) (Financial Debt - Cash)/Ebitda for the last twelve months, ratio equal to 3.0 times. The calculation of both
ratios considers, the Financial Debt less financial investments and cash.
This financing policy was confirmed at the last Ordinary Shareholders’ Meeting held on April 25, 2013.
According to the financial statements as of December 31, 2014, resources obtained from financing are represented by accumulated equity of ThCh$956,344,862 and
current and non-current liabilities of ThCh$1,455,030,939.
The mentioned liabilities include negative balances of ThCh$3,526,424 in relation to the valuation of exchange rate and interest rate hedging derivatives. Positive
balances presented have not been deducted.
At December 31, 2013, the Group’s total debt (financial and non-financial) amounts to ThCh$2,079,450,541 and, accordingly, the maximum indebtedness ratio is
comfortably maintained.
In case the Group experiences extraordinary investment needs exceeding the established limits, such needs must be subject to approval at Board of Directors
Meetings presenting proposals for the related financing structures (issue of debt or equity securities, bank borrowings, loans from suppliers or any other capital
financing methods).
The Group’s bank borrowings or debt security issue contracts impose restrictions over the management and limits for financial ratios. These include the obligation
not to exceed the Financial debt/Ebitda ratio of 4.0 times, Financial expenses /Ebitda ratio of 3.0 times. Further details on the procedures to estimate and state
compliance with these restrictions are included in Note 30(e).
In the event of failure to comply with any of the restrictions and limits imposed by credit contracts, creditors may demand repayment of all outstanding debts, without the possibility of appeal, legal action or challenge by the debtor.
29. RISK MANAGEMENT
Technological change risk (unaudited).
The evolution in telecommunication technologies makes it necessary to permanently review existing investment plans in order for them to be focused on satisfying
the evolution in connectivity needs arising in markets. Technological changes arise from changes in demand habits as well as from the development of new communication methods whether related to applications or the speed used. The investment in new technologies can become obsolete before the term considered to
repay the investment is completed thus generating that initial profitability estimates are not met.
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As a result of the above, the risk of technological change is inherent to the industry in which the Group operates. The Group believes it is critical that they stay ahead
of technologic development by actively managing the risk of such change.
Accordingly, Entel has included an active and ongoing policy as a strategic development component for adopting cutting edge technologies and analyzing their expected return. Such a policy has allowed the Group being successful in adapting to the use of new technologies as well as being an integrated provider and adopting
new methods for doing businesses. In line with this, new technology implementation and development has allowed the Group growth and diversification reducing
its exposure to risks posed by individual services.
Regulatory Risks (unaudited).
Regulation plays a significant role in the telecommunication industry. Having stable standards and criteria allow properly evaluating projects and reducing investment risk levels; therefore, it is very important performing a proper follow-up of the evolution of standards.
The main regulation in the telecommunication sector is the General Telecommunications Act, and over the last years there have been significant changes to the
regulatory framework by means of obligations resulting from amendments to legislation including Network Neutrality, Modification of Primary Zones for local public
telephone services; Recovery and Continuity of the Public Telecommunication System; Number Portability and Installation of Antennas Broadcasting and Transmitting Telecommunication Services and the Law that introduces Digital Terrestrial Television
Subsequent to the implementation of the legal provision that reduced the primary zones from 24 to 1 in fixed telephony, during the first half of 2014 and ending in
August in the Metropolitan Region, a single tariff zone was implemented for local telephone services, which has, in fact, partially changed the consumption behavior
for telephone traffic.
Additionally, with respect to Number Portability (started in December 2011) during the last quarter of 2014, the portability of supplementary service numbers was
implemented. The first calendar was established by the Subtel, in which the geographical portability of local lines will be implemented in August 2015 and full
portability (i.e., the same number can be used in fixed and mobile networks) will be implemented in February 2016.
In terms of radio electric spectrum, considering the awarding of Block B frequency on the 2,600 MHz (LTE, Long Term Evolution or 4G) to WILL S.A., a subsidiary of
the Entel Group, in March, the project engaged in the concession decree was completed, authorizing the project works of such frequency block. Additionally and
within the framework of the public bid, with respect to the mandatory locations included, whose deadline for implementation is 2 years (up to March 2015), the
concessionaire has already started receiving the work involved, totaling more than 80% of these obligations to the completed works at the end of the year.
In addition, the public bid for awarding the concession of the public service of data transmission in the 700MHz, started in October 2013, subsequent to the bidding
process where Entel was awarded the B block of this frequency, which has a greater amount of radio electric spectrum. This award is currently in its process of
approval to obtain the final decree, after the Ministry favorably resolved the oppositions submitted and also rejected by the Court of Appeals (pursuant to the process
established by the Law) the appeal, confirming the rejections already issued by the Administrative Authority.
This radio frequency, as explained by several experts, is relevant to the supply of telecommunication services, especially high speed data transfer services (LTE), as
it allows complementing the supply of LTE or 4G services with a band with greater indoor penetration and better rural coverage.
Accordingly, a lawsuit was filed with the TDLC (by one of the same companies that submitted the opposition submitted) arguing that such bid did not create favorable conditions as it accumulated spectrum and did not guarantee its efficient use. This process is still under review by the TDLC, but has not yet generated the
suspension of the administrative acts which are processed with the Subtel and/or the controllership.
During 2014, date the new tariff decrees came into force, the General Instruction No.2 of the TDLC was implemented, which establishes that all commercial sales
offers from mobile telephone companies should make no distinction between on-net and off-net minutes, i.e., all commercial offer will be classified as "Flat rate"
or "Any destination."
In addition, for the process started by the FNE (non-contentious) before the TDLC, through which it requested providing recommendations to the MINVU and Subtel
so that both regulators modify the sectoral regulations and in their case perfect it, so that a greater number of suppliers can provide telecommunication services in
95
buildings and condominiums, the TDLC resolved in the same, i.e., it instituted the recommendation that such bodies establish regulations which oblige new building
projects (buildings and condominiums) with the existence of a greater number of telecommunications service options.
Subsequent to the parliamentary review in both houses, the Free Choice of Telecommunications Services Project was approved with a large majority, where obligations to buildings and condominiums are established to allow access for telecommunication services in this type of property, even retrospectively for the developments of buildings and condominiums already built.
With respect to the tariff process of Entel PCS Telecomunicaciones, the first year of implementation of the new rates of the respective Tariff Decree Law is ending,
and in accordance with this document, from January 2015 a new structural drop in rates of year 1 occurred, of approximately 15%.
Accordingly, the tariff process of fixed telephony of Telefónica CTC is still awaiting approval. It accounts for more than 60% of the fixed-lines, where Subtel's final
tariff proposal is a decrease in the access fee rate of 38%, which is currently under review by the controllership. Accordingly, it has entered the final stage of the
Tariff Setting of VTR (fixed), where the tariffs proposed by Subtel and on which the regulatory body has insisted, are similar to those currently pending for Telefónica,
which will involve reductions in payment of access fees of 40% on calls to this company.
With respect to legislative Telecommunications, the draft bills that are outstanding, currently on parliamentary debate are the draft bill creating the Superintendence of Telecommunications, which regulates the minimum guaranteed internet speed and the draft bill that stops emergency calls, for the purpose of an adequate
use of the service, avoiding irrelevant or prank calls.
Additionally, during the third quarter the discussion of a draft bill began, which reformulates the Consumer Rights Law (SERNAC), to strengthen the activity of the
agency and provide new powers. This project has made rapid progress, mainly driven by the Government, and our dealers through the trade association for mobile
operators have submitted their comments for the bill.
Finally, the new Regulation of Telecommunications Services was introduced in June, which in addition to establishing a new regulatory framework for telecommunication services in Chile, updates industry regulations by extending obligations that already existed in the telephony services to paid Internet access and Television
services. Additionally, this new regulation covers new services such as roaming and value-added services, establishing conditions for their engagement, enabling
and disabling, modifies collection documents, and requires a greater amount of information available for users
These regulatory changes being introduced by the authority provide new business opportunities. Furthermore, the diversity and relative size of Entel protect it from
the effects of adverse or inadequate regulation, reducing the risk created for its operations, cash flows, creation of value for shareholders, and contribution to the
community. However, within a regulated industry such as the one in which Entel operates, changes in regulations or in the policies made by legal and regulatory
authorities cannot be ruled out and have the potential to impact the company’s results or restrict its possibility for growth..
Exchange Rate Risk
Entel’s debt is mostly held in foreign currency and includes long-term bank borrowings and bonds of US$2,100 million which are detailed in Note 15 to these financial statements. In addition, part of Entel’s suppliers, also detailed in Note 15, permanently generate obligations in foreign currency. Both represent liabilities which
value changes on a daily basis as a result of exchange rate fluctuations. For this reason, Entel enters short and long-term foreign currency assets (derivatives) to
protect against these variations and eliminate the risk of exchange rate fluctuations.
Interest rate Risks
The Group’s policy for hedging against the interest rate risk seeks to ensure that the level of hedging of its financial expenses allows the business performing adequately over time as well as having greater predictability and control over financial expenses.
In general, there is a positive relation between the company’s business, economic cycle and interest rate level. This gives rise to a natural hedging between the
business’ cash flows and financial expenses although in certain situations time gaps may occur.
96
The Company’s debt is mainly composed of international and local long-term bonds and hedging instruments denominated at fixed rates. However, to comply with
the aforementioned objectives and those portions of variable rate debt, the Company is considering entering into interest rate insurance to fix interest rates, such
as FRA or Cross Currency Swaps to reduce the potential variability arising from interest on debts agreed at variable interest rates (e.g. LIBOR, TAB, Cámara, etc.)
The factors taken into consideration when making decisions include the review of implicit discounts in the curves of future rates (swap curves), market surveys,
surveys of economic expectations provided by public entities and estimates regarding the economy and its impact on the main variables.
Credit Risk
The credit risk derived from balances with banks, financial instruments, marketable securities and derivatives is managed by the Finance and Management Control
Management in conformity with the policies created for purposes of maintaining invested capital. These policies diversify risk by means of pre-established limits
for the duration of placements, percentage by institution and the risk of instruments in which cash surpluses are invested. The investment instruments approved
and used are those issued by the Chilean Central Bank or banking subsidiaries with high risk ratings. Investments may be denominated in the domestic or the main
foreign currencies.
The risk exposure related to the recovery of receivables arising from commercial operations is derived from the terms of payment that, due to the characteristics
of the telecommunication industry, must be offered to direct customers, intermediaries, and other national and international operators with whom reciprocal connection agreements are held.
The management of the risk related to receivables is intended to minimize exposure, insofar as possible given market conditions. Risk management processes differ based on the profiles of debtors and in conformity with segmented portfolio controls, including: consumers, SMEs, corporations, telecommunication companies,
correspondents, distributors, large retailers and other channels for the distribution of goods and services. See Note 8.
For each segment, there are prospective and predictive models that allow generating policies depending on the origin of the debt, which range from the prepaid services used for the customer/product combinations (presenting the highest risk) to the establishment of credit limits with and without collaterals, credit insurance,
and other alternatives which are assessed on a case-by-case basis.
Liquidity Risk
In terms of providing the liquidity required to meet financial obligations in a timely manner, Entel plans for future maturities by searching the market alternative
that can provide funds in a timely manner. During 2014 and 2013, installments due in June 2014 and 2015 were prepaid, thus avoiding the potential risks of the
debt markets. The company has contracts for online bond issue of securities dematerialized bearer; also, approved credit lines with banks in Chile, to cover potential
liquidity risks.
A detail of the maturity dates of financial liabilities is provided in Note 16.
97
30. CONTINGENCIES, LITIGATION AND COVENANTS*
Contingencies related to direct commitments maintained by Group companies at December 31, 2014 and 2013, are as follows:
a.Contingencies related direct commitments for foreign purchase orders of ThCh$9,084,526 and ThCh$13,346,964, respectively.
All these purchase orders are recorded in foreign currencies and have been translated using the exchange rates at the end of each period.
b. Contingency related to bank guarantee certificates provided to ensure compliance with contracts related to the award of 900 MHz frequencies, and the replacement of public use assets for the construction and maintenance of networks. At each period, these certificates amounted to ThCh$84,063,494 and ThCh$104,421,568,
respectively.
c. At December 31, 2014, significant lawsuits and legal procedures that could represent a loss contingency for the Group companies are as follows:
Vulco S.A. vs. Entel S.A.
Court: Arbitral Court
Notification: December 12, 2014
Matter: Arbitration
Plaintiff: Vulco S.A.
Request: Compensation for damages of Ch$270 million.
Cause of action: Breach of obligation to return property and compensation for damages.
Current procedural stage: As of December 9, 2014, plaintiff filed the lawsuit, sending the related background information on December 12, 2014. The case is in the
course of completion for of information gathering.
Probable outcome: It is considered likely that the case will be rejected on poor legal grounds..
Promotora Promout vs. Entel y Entelphone S.A.
Court: 18th Civil Court of Santiago,
Case No.: 1250-2006.
Notification: March 17, 2006
Defendants: Entel and Entelphone
Request: Compensation of UF46,000 for consequential and moral damages.
Cause of action: Alleged damages for non-compliance with telemarketing contract.
Current procedural stage: On October 17, 2014 the plaintiff submits a written document requesting the parties to hear sentence as probationary period had ended.
On December 11, 2014, the Court sent a subpoena for the parties to hear the judgment.
Probable outcome: It is considered likely that the case will be rejected based on poor legal grounds.
Manzano vs. Entel S.A.
Court: 1st Civil Court of Puerto Montt
Case No.: 6286-2010
Notification: December 27, 2010
Matter: Compensation of damages.
Plaintiff: Federico Isaías Manzano Vera
Request: Compensation of damages for Ch$100,808,000.
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Cause of action: Leal non-compliance due to the fact that a false crime was imposed on the defendant.
Current procedural stage: Court accepts objection of gross incompetence. Plaintiff filed an appeal. Case No. 384-2011. On July 25, 2011, the court annulled the
appeal ruling rejecting the objection. Enforcement ordered on August 2. Case filed since June 22, 2012. File No. 130-2012
Probable outcome: None, case ended.
Motta vs. Ericsson Chile S.A.
Court: 8th Civil Court of Santiago.
Case No.: 35257-2011
Notification: October 5, 2012
Matter: Compensation of damages.
Plaintiff: Carlos Motta Pouchucq
Request: Compensation of Ch500 million.
Cause of action: Death from accident in the workplace.
Current procedural stage: On December 5, 2014, the intended suspension was rejected. In the same resolution the original ruling was confirmed as favorable for Entel.
Probable outcome: Pending completion of the term (December 24) to request written notice that the judgment has been declared as enforceable.
Medel vs. Garrido y Entel S.A.
Case No.: 15404-2012
Notification: March 12, 2013
Matter: Compensation for damages for extra contractual liability in major claim in ordinary proceedings.
Plaintiff: Pamela de las Mercedes Medel.
Defendants: (1) Dhanna Andrie Garrido Burgos (2) Beltran Charizola and Balaguer Ltda. or Incobech Ltda. (3) Empresa Nacional de Telecomunicaciones S.A. (joint
defendants)
Request: Joint responsibility in conformity with Article No.183 and others of the Labor Code and payment of Ch$250,000,000 to the employee’s mother.
Cause of action: Labor accident.
Current procedural stage: On June 16, 2014 the settlement hearing was scheduled to occur but did not take place. On June 23, 2014, the case is received for the
evidentiary stage, which is still pending.
Probable outcome: It is considered likely that the case will be rejected on poor legal grounds.
Plug & Play Net S.A. vs. Entel S.A.
Court: Arbitral Court.
Notification: November 20, 2013
Matter: Arbitrage. Claim for compensation of damages.
Request: Claim for compensation of damages.
Cause of action: non-compliance with contract.
Current procedural stage: On November 20, 2013, notified of the claim for compensation of damages filed by Plug & Play Net S.A., based on the alleged non-compliance of Entel with its obligation to provide the transmission of cable television to Villarrica and Temuco via fiber optics. Such alleged non-compliance would
have caused damages to the plaintiff of Ch$4,000,000,000, approximately. On April 23, 2014 Entel responded the complaint and filed a counterclaim. On June 20,
201, a written document was submitted. On December 15, 2014, a written document was submitted on behalf of Entel, answering the request as to its position in
the administrative appeal for review submitted by the plaintiff regarding the legal action. The resolution on the administrative action for review submitted by both
parties is pending.
Outcome: It is considered likely that the case will be rejected based on poor legal grounds.
99
ACB Ingeniería vs. Entel S.A.
Case No.: 12.403-2014.
Notification: September 23, 2014.
Matter: Compensation for damages by liability in tort in ordinary procedure for a large amount.
Plaintiff: ACB Ingeniería Limitada.
Defendant: Empresa Nacional de Telecomunicaciones S.A.
Request: Compensation of damages for Ch$1.116.720.000.
Cause of action: Breach of contract.
Current procedural stage: On October 13, 2014 Entel submits a written document deducting a dilatory plea for the existence of arbitration clause in the contract on
which the plaintiff is based. On November 5, 2014 the plaintiff answered the request as to its position. Finally, on December 4, 2014, the Court accepts the exception,
and declared incompetent to continue to review the case, which ended the case. As a result, ACB Engineering must submit the case with an arbitrator if it intends
to continue with the lawsuit.
Probable outcome: None, case ended.
Arriagad con Claro Chile vs. Entel PCS.
Court: 3rd Civil Court of La Serena
Case No.: C-683-2014
Notification: October 15, 2010
Matter: Claim for compensation of damages
Plaintiff: Sandra Arriagada Aliaga
Request: Compensation of Ch$250 million.
Cause of action: Installation of antennas with harmful effects.
Current procedural stage: On October 15 Entel submitted a written document to begin the evidentiary stage to process the incident because of the dilatory exceptions filed by Claro Chile S.A., because not all defendants have been noticed. On October 27, 2014 a written document is submitted presenting Entel's dilatory
exceptions. As of the present date, such written document has not get been provided.
Probable outcome: It is considered likely that the case will be rejected based on poor legal grounds.
d. Tax Procedures
>>The Parent has been notified of the following tax settlements by the Chilean Internal Revenue Service:
1) Settlements 4 and 5 dated April 25, 2007. These settlements request refunds of ThCh$2,641,281 plus adjustments for inflation, interest and fines, derived from
allocations and adjustments made by the Company in calculating its profits for tax years 2004 and 2005, which according to the Service are not correct. The final
stage in this process corresponds to the filing of a claim against the tax court dated on July 11, 2007 which is currently pending.
2) Settlements 33–36, September 1, 2009. These settlements request refunds and tax payments for ThCh$4,657,018, plus adjustments for inflation, interest and
fines, derived from allocations and adjustments made by the Company in calculating its profits for the tax years 2007 and 2008, which according to the Service are
not correct.
On January 7, 2011, the Service issued resolution 59-2010, which only partially accepted the request for the review of the tax audit presented on November 13, 2009.
An appeal was made against this resolution in the tax courts which is currently in the probationary stage.
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On April 30, 2008, the subsidiary Call Center S.A. was notified by the Chilean Internal Revenue Service about Subpoena No.26, dated April 29, 2008. This subpoena
contests the tax losses declared by the Company up to tax year 2005 for a total of ThCh$11,599,818. If the claim is successful, it will not be possible to use these
losses against future earnings.
On August 31, 2009, the Chilean Internal Revenue Service issued resolution 59-02, which only partially accepted the request for the review of the tax audit presented
on September 9, 2009. An appeal was made against this resolution in the tax courts which is estimated to be accepted based on the grounds presented.
The subsidiary Entel Contac Center S.A. (formerly-Satel S.A.) has been denied refunds of provisional tax payments of ThCh$103,109 and ThCh$81,510 for the tax
years 2003 and 2004 , respectively. Currently, the Company is waiting for the court to enter evidentiary stage.
e. There are management restrictions and limits on financial indicators (covenants) imposed by the syndicated loan contract led by Citibank, N.A., credit contracts
with Scotiabank & Trust (Cayman) Ltd. and the Bank of Tokyo-Mitsubishi UFJ, Ltd., and the contracts for issuing dematerialized debt bonds. The most significant of
these stipulate the following:
No merger or consolidation with another company is allowed unless the Company continues to exist and none of the limits established by the debt covenants are
broken.
Neither the company nor its subsidiaries may sell assets without considering:
i) The asset’s fair value
ii) Sales or lease operations for assets must not exceed 35% of assets in each year, except for obsolete or unnecessary inventory, operations involving cash or cash
equivalents, customer agreements, and other operations arising in the normal course of business.
iii) Any sale of shares in the subsidiary Entel Telefonia Personal S.A. must guarantee retention of at least 50% of the shares and the possibility of having a majority
on the board of directors.
Assets must not be pledged, with the exception of pledges existing as of August 13, 2007 not exceeding US$60 million and related to securitization operations,
leases or credit letters, deferred taxes, duties on new acquisitions, or projects not exceeding certain specified amounts..
The consolidated indebtedness ratio must not exceed 4:1. In calculating the ratio, only financial debts are considered (i.e. debts arising from goods and services
related to the line of business are excluded) in relation to the sum of the profit for the period plus depreciation, amortization, and other expenses that do not represent cash flows (EBITDA).
The consolidated interest hedge ratio must not be less than 3:1. For this purpose, the ratio of EBITDA and net financial expenditure is considered, both estimated for
the last twelve months prior to the end of each quarter.
In the event of non-compliance with any of these requirements, creditors can demand payment of all indebted amounts, without any right to appeal, legal action or
challenge by the debtor. At December 31, 2014, the Company complies with all these requirements.
Based on audited or unaudited financial statements, as applicable, the company calculates and monitors compliance with the covenants included in credit contracts
on a quarterly basis. These estimates are carried out in line with the definitions included in the agreements.
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At December 31, 2014, the results of the monitoring for the quantitative covenants are as follows:
Consolidated indebtedness indicator (Debt/EBITDA). The ratio is 3.6:1 compared to the maximum permitted level of 4:1.
Indicator for coverage of consolidated interest (EBITDA / Financial Expenses). The ratio is 9.34:1, compared to the minimum permitted level of 3:1.
f. Contingency for possible expenditure resulting from amendments to the Urban Development Act, which establishes regulations for the installation of antennas
(the Antennas Act), as discussed under regulatory risks in note 29..
31. THIRD PARTY GUARANTEES
The Group companies have not received any guarantees from third parties in relation to the acquisition of assets, loan operations, or to guarantee any other type
of obligation.
32. ENVIRONMENT
The Companies have not made any disbursements for environmental standards.
33. RESEARCH AND DEVELOPMENT
During the periods covered by the financial statements herein, the Group companies have not conducted any research and development activities.
However, the parent maintains a contract with the main public agency responsible for promoting innovation (Corfo’s Innova Chile Committee) in order to promote
business innovation, innovative entrepreneurship, technology diffusion and transfer, and public innovation. The expenses incurred up to date in the context of this
initiative do not yet qualify as research or development expenses.
In conformity with this contract, a modern Innovation Center focused on the generation of high technology projects was created, with the joint participation of clients
and technological allies.
34. SANCTIONS
The Group companies and their directors and managers have not been subject to sanctions of any nature by the Chilean Securities and Insurance Commission or
any other regulatory authorities.
35. FINANCIAL INFORMATION FOR SUBSIDIARIES
The financial information for the subsidiaries included in these consolidated financial statements is provided below. Transactions and balances with the parent are
also included.
The above information has been prepared in conformity with International Financial Reporting Standards.
102
a) Financial statements:
31.12.2014
Company
Entel Call Center S.A.
Micarrier Telecomunicaciones S.A.
Entel Contact Center S.A.
Entel Servicios Empresariales S.A.
Soc.de Telecomunicaciones Instabeep Ltda.
Transam Comunicaciones S.A.
Will S.A.
Americatel Perú S.A.
Servicios del Call Center del Perú S.A.
Nextel Perú S.A.
Entel Internacional B.V.I Corp.
Assets
31.12.2014
Profit
Comprehensive
Current
Non-current
Current
Liabilities
Non-current
Revenue
(Loss)
Income
264,852,860
767,788,001
264,379,336
325,426,250
1,160,219,986
135,190,069
135,190,069
16,623,368
142,444
13,443,600
-
1,214,697
564,636
564,636
(7,655,548)
9,822
25,469,486
504,367
-
-
(8,196,466)
328,553
1,101,045
214,603
944
739,669
441,519
441,519
7,031,991
23,451,114
3,071,539
18,980,067
20,467,223
1,968,622
2,109,694
27,557,626
8,951,369
17,487,399
-
78,946,832
8,131,155
8,131,155
257,917
2,259,054
176,498
-
169,900
177,342
177,342
1,772,354
5,947,754
926,703
-
8,450,067
1,186,828
1,186,828
399,052
1,161,027
433,731
-
4,633,368
344,002
344,002
3,944
1
-
788,484
-
(44,023)
(44,023)
(1,376,060)
1,381,624
1,037,935
770,448
6,019,635
53,470,226
(1,376,060)
393,027
3,981,342
118,205
5,387,158
-
(517,676)
(517,676)
6,080,402
24,104,925
6,767,101
7,249,393
28,453,484
1,884,320
1,884,320
4,231,355
3,400,582
2,218,561
2,990,330
13,669,458
849,612
849,612
126,418,719
510,095,882
202,414,483
322,497,929
153,172,432
(92,243,683)
(92,243,683)
25,989
242,174
-
-
-
67,157
67,157
31.12.2013
Company
Assets
31.12.2013
Liabilities
Profit
Comprehensive
Current
Non-current
Current
Non-current
Revenue
(Loss)
Income
380,860,380
680,804,620
321,934,367
335,095,607
1,283,671,958
131,099,800
131,099,800
15,899,960
126,343
13,105,872
-
1,430,075
628,519
628,519
7,223
32,762,868
144,027
-
-
(506,811)
152,560
551,976
439,612
218,584
-
887,555
212,619
212,619
10,120,190
19,634,489
6,556,725
15,597,542
20,865,186
1,400,278
1,408,482
17,528,513
10,361,589
16,463,465
13,828
61,456,985
2,651,607
2,651,607
184,145
2,307,051
328,065
-
177,714
139,229
139,229
2,607,618
3,732,468
736,947
-
7,438,075
789,966
789,966
412,171
832,122
463,533
-
4,552,420
257,145
257,145
3,737
1
-
744,254
-
(16,479)
(16,479)
Soc.de Telecomunicaciones Instabeep Ltda.
Transam Comunicaciones S.A.
1,406,368
1,805,815
369,164
5,226,827
26,376,167
269,834
269,834
366,910
4,128,448
169,718
4,949,684
-
(671,145)
(671,145)
5,387,517
103,917,596
59,611,285
3,887,072
21,965,883
1,010,769
1,010,769
Servicios del Call Center del Perú S.A.
2,314,357
2,510,807
2,381,058
1,011,749
9,644,207
610,024
610,024
115,208,682
244,143,106
56,310,272
101,412,786
47,025,737
(13,186,086)
(13,186,086)
25,016
211,233
35,298
-
-
16,366
16,366
Will S.A.
Entel Perú S.A. (Ex Nextel Perú S.A.)
Entel Internacional B.V.I Corp.
103
b) Balances due to and from the parent:
DUE FROM SUBSIDIARIES
Current
Tax ID Number
Company
Country
Currency
Non-current
31.12.2014
31.12.2013
31.12.2014
ThCh$
ThCh$
ThCh$
31.12.2013
ThCh$
324,680,428
96.806.980-2
Chile
CLP
35,176,732
15,115,960
309,301,190
96.554.040-7
Chile
CLP
6,511
-
-
-
96.563.570-K
Chile
CLP
68,422
-
13,764,970
13,339,787
-
96.548.490-6
Chile
CLP
3,337
2,819
-
96.697.410-9
Chile
CLP
955,046
1,333,812
-
-
96.553.830-5
Chile
CLP
-
-
-
56
744,254
79.637.040-8
Instabeep Ltda.
Chile
CLP
-
-
788,484
96.652.650-5
Chile
CLP
360,089
621
6,019,636
5,226,827
96.833.480-8
Will S.A.
Chile
CLP
438
415
5,387,159
4,949,684
0-E
Nextel Perú S.A.
Perú
USD
11,409
-
300,182,759
84,010,409
0-E
Perú
USD
965,102
196,121
5,799,003
2,720,871
0-E
Servicios de Call Center del Perú S.A.
Perú
USD
Total
40,215
49,187
2,699,682
1,262,419
37,587,301
16,698,935
643,942,883
436,934,735
31.12.2014
31.12.2013
31.12.2014
31.12.2013
ThCh$
ThCh$
ThCh$
ThCh$
DUE FROM SUBSIDIARIES
Current
Tax ID Number
Company
Country
Currency
Non-current
76.479.460-5
Chile
CLP
4,794
9,588
-
-
96.561.790-6
Chile
CLP
-
-
4,607,301
4,574,747
414,295
96.554.040-7
Chile
CLP
57,334
48,578
1,084,988
96.563.570-K
Chile
CLP
2,037,238
1,331,279
-
-
96.548.490-6
Chile
CLP
-
-
2,067,437
2,113,274
5,003,058
96.697.410-9
Chile
CLP
-
-
13,647,165
96.553.830-5
Chile
CLP
49,639
77,510
244,813
932,675
96.672.640-7
Chile
CLP
387,930
408,420
942,262
800,416
Perú
USD
920,658
-
-
-
Islas Virg. Bri
USD
-
-
239,677
207,230
3,457,593
1,875,375
22,833,643
14,045,695
0-E
0-E
Entel B.V.I Corp.
Total
104
c) Transactions between the parent and subsidiaries:
Tax ID
Number
31.12.2014
Company
Transaction
31.12.2013
Amount ThCh$
Credit (debit) to profit
or loss
Amount ThCh$
Credit (debit) to profit
or loss
96.806.980-2
Servicios Prestados
125,302,105
125,302,105
112,917,367
112,917,367
96.806.980-2
Servicios Recibidos
9,200,148
(9,200,148)
10,255,829
(10,255,829)
96.806.980-2
Préstamos Otorgados
-
-
62,191,846
-
96.806.980-2
Préstamos Recibidos
34,221,515
-
-
-
76.479.460-5
Servicios Prestados
1
1
19,523
19,523
96.561.790-6
Préstamos Reembolsados
-
20,866,220
-
96.561.790-6
198,885
-
-
-
96.554.040-7
Servicios Prestados
84,352
84,352
67,236
67,236
96.554.040-7
Servicios Recibidos
613,855
(613,855)
605,972
(605,972)
96.554.040-7
663,668
-
364,112
-
96.563.570-K
Servicios Prestados
305,759
305,759
312,704
312,704
96.563.570-K
Servicios Recibidos
8,273,295
(8,273,295)
6,222,065
(6,222,065)
96.563.570-K
-
-
1,724,557
-
96.563.570-K
32,002
-
-
-
96.697.410-9
Servicios Prestados
21,460,809
21,460,809
21,898,463
21,898,463
96.697.410-9
Servicios Recibidos
2,728,369
(2,728,369)
3,229,405
(3,229,405)
96.697.410-9
7,627,644
-
8,120,757
-
96.548.490-6
Servicios Prestados
72,354
72,354
38,249
38,249
96.548.490-6
-
-
93,157
-
96.548.490-6
136,677
-
-
-
96.553.830-5
Servicios Recibidos
722,729
(722,729)
373,336
(373,336)
96.553.830-5
-
-
1,132,096
-
96.553.830-5
723,230
-
-
-
96.672.640-7
Servicios Recibidos
4,633,369
(4,633,369)
4,552,420
(4,552,420)
96.672.640-7
-
-
356,725
-
96.672.640-7
76,267
-
-
-
96.652.650-5
Servicios Prestados
75,927
75,927
15,142
15,142
96.652.650-5
764,526
-
-
-
96.833.480-8
Will S.A.
Servicios Prestados
4,304
4,304
4,133
4,133
96.833.480-8
Will S.A.
410,654
-
539,296
0-E
4,447,042
-
0-E
Servicios Prestados
1,085,500
1,085,500
906,243
906,243
0-E
Servicios Recibidos
757,530
(757,530)
247,625
(247,625)
0-E
2,995,058
-
178,573
-
0-E
Servicios Prestados
122,846
122,846
106,710
106,710
0-E
Servicios Recibidos
279,400
(279,400)
283,833
(283,833)
0-E
Nextel Perú S.A.
314,059,778
-
91,345,076
-
-
36. SUBSEQUENT EVENTS
Between January 1, 2015 and the date of issuance of these consolidated financial statements, no other subsequent events have occurred that could significantly
affect the amounts contained herein.
105
_ Ratio Analysis Consolidated Financial Statements
I. FINANCIAL STRUCTURE, EVOLUTION OF REVENUE, EXPENSES AND PROFITABILITY
Financial ratios
This document presents the changes noted in the most significant financial ratios over the last twelve months.
Information is not adjusted for changes in the purchasing power of the currency. In conformity with International Financial Reporting Standards (IFRS) as issued by
the IASB, in 2008 the Company has not price-level adjusted its figures.
Consumer Price Index for the year ended December 31, 2014, has recorded the following variations: 4.6% for the last twelve months; 22.7% from the date in which
the application of price-level adjustment was discontinued
Dec 31, 2014
Dec 31, 2013
LIQUIDITY RATIOS
Current liquidity (times) (Current assets /Current liabilities)
1.50
1.10
Acid ratio (Cash and cash equivalents / Current liabilities)
0.65
0.04
217.44
156.16
INDEBTEDNESS RATIO (times)
Indebtedness ratio (%) (Total debt / Equity)
Current debt portion (%) (Current liabilities / Total debt)
28.20
37.45
Non-current portion (%) (Non-current liabilities / Total debt)
71.80
62.55
1.88
9.49
Interest coverage (Income before taxes and interest/financial expense)
EFFICIENCY AND PROFITABILITY RATIOS
Profit margin (%) (Profit on revenue)
3.44
9.03
Equity profitability (%) (Profit for the year on average equity) (annual)
6.15
17.34
Asset profitability (%) (Net profit for the period on average asset) (annual)
2.13
7.44
238.75
621.36
PROFABILITY AND VALUE PER SHARE
Earnings per share (annual) ($)
Dividend yield (%) (Dividend last twelve months / share quotation at year end)
3.77
5.26
Book value per share (Equity / number of shares) ($)
4,043.34
3,725.15
Market value per share ($)
6,096.60
7,130.60
Ebitda
(Earnings before income tax, interest, adjustments and exchange-rate fluctuations depreciations, amortizations and extraordinary items).
Profit or loss at EBITDA level decreased from Ch$467,316 to Ch$370,150 million, compared with the same period in prior year, a decrease of 20.79%. EBITDA was
affected by the impact of the development of the operation in Entel Perú. However, when excluding from each period the profit or loss of the subsidiary in Peru,
the EBITDA shows an increase of 0.28%.
106
During August 2013, Entel Chile S.A. acquired Nextel Perú (currently Entel Perú), the third largest mobile telephone company in Peru. The transaction amounted
to US$410.6 million and involved the company’s entire share capital. The financial statements of Entel Perú were first included in the consolidated financial statements of Entel on August 31, and its profit or loss was recognized starting from September 1, 2013. The inclusion of Entel Perú implied at a profit or loss level,
the recognition during this period compared to the prior period of higher revenue of ThCh$105,705 million net of intercompany operations, and a higher net loss of
ThCh$79,057.
From October 2014, Nextel Perú was officially renamed Entel Perú, thus consolidating the change in the brand in Peru. An aggressive advertising campaign was
launched focused on boosting the brand and services in that market. The campaign has been focused on achieving a relevant position in Peru, promoting a segmentation of the personal and corporate customers, redesigning the commercial offer and customer service, and expanding the distribution channels. Additionally,
the Entel Perú has significantly extended and improved the current mobile network and the 2G, 3G and 4G technologies, the latter being the largest in the Peruvian
market. Also, points of sales and services have been doubled and the handset offer has been improved.
Evolution of financial ratios
Between the periods, we noted a decrease in Entel Group’s efficiency financial indicators, which is associated with margin and profit contraction over the last twelve
months, commented upon below. Additionally, certain indicators are impacted by the incorporation of Entel Perú during the second half of 2013.
Efficiency and Profitability Ratios (profit margin and profitability on equity and assets), have been mainly affected by the incorporation of profit or loss of Entel Perú,
which includes significant investments with related expenses, as well as higher indebtedness levels related to the expansion of its infrastructure and commercial
offer required to developed its long-term strategy to participate in the Peruvian market.
In a highly competitive environment, after the entry to the market of new competitors and the start of the number portability system at the beginning of 2012, and the
reduction in mobile termination rates in Chile by 75% at the beginning of 2014, the Company has been able to maintain growth, particularly in post-paid mobile services
that represent a higher value, as well as growth in data services and information technology (IT), provided over a fixed network (focused on business segments).
The indebtedness ratio has increased from 156% to 217%. This change is due to the combined effect of an increase of ThCh$705 million or 51% in liabilities and, an
increase of ThCh$75 million or 9% in equity.
The net increase in liabilities is mainly due to an increase in financial liabilities of ThCh$615 million, and in accounts payable to suppliers of ThCh$62 million, used
to increase the investments in property, plant and equipment under the Company’s expansion plan, as well as the increase in operations and normal business use.
In addition, the increase in equity was due from higher net retained earnings from the dividend distribution, as well as due to the increase in reserves for exchange
rate differences for investments in Peru’s companies, as a result of the increase in exchange rates, cash flows hedging reserves from the increase the market
values of financial derivative instruments, and the increase in retained earnings for the effect on net deferred tax assets resulting from the increase in the tax rate
from the tax reform.
There were no significant effects associated with exchange rate fluctuations as these have been offset by the currency risk hedging policies instituted by the Group.
This policy is based on hedging such exposure using financial derivatives instruments.
Liquidity ratios increased from 110% to 150% (current assets over current liabilities), because of a higher percentage of current assets compared with current
liabilities, due to an increase of ThCh$360 million in cash and cash equivalents related to funds obtained from bond placements during 2014, as well as an increase
of ThCh$71 million in current liabilities mainly from the increase in trade payables to suppliers of ThCh$62 million.
107
The interest coverage ratios shows an adequate level of solvency, reaching 1.9 times, showing a decrease compared with the prior period mainly due to the increase
in finance costs associated with a higher indebtedness, and a decrease in profits resulting from the expansion of the operation in Peru.
The position of this ratio is even more significant when considering net finance costs; i.e., by offsetting finance income and finance expenses. If measured using this
method as of December 31, 2014 the ratio is higher than 2.1 times.
Likewise, if the calculation is made on the basis of cash flows, considering profit before depreciation, the ratio is slightly higher than 7.6 times.
The calculation of interest coverage ratios considers interests from bank borrowings, differences in rates because of the use of interest rate hedging agreements
and interests from finance lease contracts as finance expenses. Interest is calculated on the basis of the effective rates, in accordance with the amortized cost
procedures contained in IAS 39.
We noted an increase of ThCh$778 million or 34% in the Group’s total assets.
The main variations during the last twelve months in total assets are noted in the caption Property, plant and equipment, which shows a net investment of ThCh$281
million. This corresponds to the amount by which investments exceeded depreciation for the period; and where gross investments amounted to ThCh$514 million.
Additionally, there is an increase of ThCh$360 million in cash and cash equivalents related to funds obtained in the in the bond placement during the current year
to face the Company’s growing plans, ThCh$104 million in other non-current non-financial assets for derivative contracts as part of the Company’s currency and
interest rate hedging strategy, and an increase of ThCh$78 million in deferred tax assets during such period.
These increases are slightly offset by a decrease in trade receivables and inventories of ThCh$26 million and ThCh$43 million, respectively.
The 82% of investments in property, plant and equipment of the Entel Group, including its subsidiaries in Peru, was focused on higher development services, particularly mobile services, and 18% on investments in fixed telephony network platforms and infrastructure.
The investment in mobile services mainly related to investments in network infrastructure.
During the last twelve months, the Company recognized investments of ThCh$5 million in real estate, related to works performed in one of the towers in Parque
Titanium, destined to become the Group’s headquarters. As of December 31, 2014, investment in real estate amounted to ThCh$57 million.
Current inventories mainly relate to mobile handsets tied to services users. Inventory levels, activities and turnover are determined on the basis of portfolio growth
projections, the demand for handset renewal, changes in technology, and customer retention campaigns.
Market ratios
Entel Group is part of a highly competitive market in the different lines of services offered by the Group.
Entel continues to leverage from the sound evolution of its high-value mobile customers despite the slowdown in the industry in Chile, in line with a lower dynamism
in the Chilean economy
The Company continues its commitment to maintain a business model based on cornerstones such as the high quality of services, the best network infrastructure
and a high degree of innovation, which allows flourishing in highly competitive markets.
108
Over the last few years, there have been variations due to the large number of competitors in the telecommunication market. In the mobile services area, the new
operators to which the authorities granted spectrum, as well as the gradual incorporation of Mobile Virtual Network Operators (MNVO), has broaden competition
Entel Group entered into a local roaming agreement and MNVO agreements with different market players, whereby Entel grants access to mobile networks in areas
where they have no coverage using its own networks, and also offer network infrastructure services.
In addition, at industry level, we have noted a trend to provide increasingly technologically advanced and expensive mobile handsets to customers. The use of this
range of handsets allows increasing the supply of classes of services, particularly in the mobile data area.
The Company has continued to apply its strategy to increase the use of mobile data, where it has made significant investments to increase the penetration by smartphones into the market. Through to the present date, 66% of post-paid customers have a data or multimedia plan, which represents a sound increase compared
with that 55% recorded in December 2013. Additionally, in the prepaid segment, the service penetration has growth significantly in time.
In the corporate segment, the Company has continued consolidating and increasing its leadership, both in mobile services and in integrated voice, data and internet
services, as well as the IT outsourcing offer.
The Group’s favorable positioning is its main strength to face the market adjustments lying ahead. In the mobile service area, which represents 78% of the current
year revenue, the “Entel” brand maintains a strong positioning, and it is preferred by a large number of costumers. Through to the present date, such factors have
been crucial for managing market share policies and customer portfolio composition (post-paid and pre-paid).
In the last ranking generated by the Undersecretary of Telecommunications (Subtel), Entel leads such customer satisfaction ranking with 51.6%, on top of the other
carriers. In terms of mobile accessibility, Entel was in first place with 99.3%.
Also, for twelve consecutive years, Entel has maintained its first place in Mobile Service Customer Satisfaction, as awarded by the Organización Pro Calidad and
Revista Capital in August 2014.
During 2013, Entel obtained Cisco’s Partner Gold certification, being the only Chilean company to obtain it. This certification is the highest recognition awarded by
Cisco to its partners, and shows that Entel has all the technical, business and service excellence qualities required to provide Cisco systems supported solutions
to its customers. To achieve this, the Company performed individual certification and training processes in three technological architectures: Borderless Network,
Collaboration and Datacenter.
At the end of 2013, Asociación Iberoamericana de Relaciones Empresa Cliente (AIAREC) provided Entel with the “2013 Best Customer Experience” award for Telecommunications in Chile. That year, the survey included the opinion of nearly 4,000 Chilean customers who assessed their experience with the brand, the products,
services and channels
During December 2013, Entel was awarded the “Best Place to Innovate 2013” for being the best telecommunications company in Chile for innovation. This award,
granted in collaboration with the School of Business of Universidad de Chile, CORFO and the research company CADEM, was based on the First Perception Ranking
performed by InnovAcción highlighting s creativity, innovation and effective change.
Market policies applied have been successful in focusing specially on customers under post-paid agreements, whose Minutes of Usage (MOU) and Average Revenue
per User (ARPU) are higher than those of pre-paid customers.
On a regular basis, the Group conducts an analysis of the main players in the telecommunications industry, either for mobile services and fixed network services.
Over the last twelve months, the mobile telephony customer base in Chile decreased by 3%, achieving a total of 10,102,116 customers. The most significant change
noted corresponds to a decrease in the post-paid customer base (both voice and mobile broadband), related mainly to lower promotions associated with the decrea-
109
se of 75% in mobile termination rates, the migration towards other means of data surfing of mobile broadband customers and the weaker economic environment.
Also, Entel has captured in a highly competitive and promotion environment, an larger number of post-paid customers, with the creation of value where the postpaid customer base (both voice and mobile broadband) increased by 4%, representing a 35% of the total mobile telephony customer base in Chile.
To continuously improve customers’ use experience in the mobile telephony plans, at the end of Q3 the Group launched a new multimedia data plan offering, introducing the feature of charging for the data used in excess of the plan limit engaged, instead of reducing the browsing speed. Currently, all the range of multimedia
plans contains such feature. The transition to such limited data plans has been highly adopted, where the new multimedia plans offer a larger data capacity and
improve the customer’s use experience. Additionally, during the last quarter, the Company started the offering that all multimedia plans with data caps exceeding
5GB were upgraded to unlimited calls.
The Company is leader in providing telecommunication services with a high degree of innovation, became the first company in Chile and Latin America to perform
a successful 4G LTE test in the 700MHz band. With the introduction of this technology, the Company will be able to offer higher speed data plans improving the
coverage in indoor spaces.
In relation to the pre-paid modality, the Company has been targeting high value customers, promoting the introduction of smartphones, thus increasing the use of
mobile data plans.
A gradual positioning in the corporate customer segment continuous to be observed, particularly for the rendering of integrated voice, data and Internet solutions,
as well as Information technology (IT) services.
The Group has developed different service proposals for the corporate segment on the basis of a solid mobile infrastructure and network GPON, and datacenter
capabilities, through the converging sale of fixed and mobile services.
The expansion of the GPON network has allowed Entel reaching a larger coverage in fixed services and increasing its presence in the corporate market, thereby
improving the connectivity solutions and the integration of fixed and mobile services with high speed access.
The Group is involved in highly complex projects in the corporate segment, achieving success and positive results, which has resulted in achieving a leading position in the telecommunication business market share. Additionally, the Group consolidated its position as a major player in the IT business and the most significant
supplier of datacenter infrastructure, having also the certifications Tier III Design Documents and Tier III Constructed Facility, granted by the Uptime Institute. Its
design, implementation and operation allow guaranteeing 99.982% availability to face any contingency.
In October 2014, the Company organized the seventh edition of the “Toward full connectivity” Entel Summit. This is the most significant technology-related event in
Chile and 1,300 people attended to it, mainly from the Corporate and SME segments. Topics addressed included the latest in technology and connectivity, and the
importance the “Internet of all things” is taken, as well as the Big Data Analysis. Both concepts can help the corporate environment and organizations, institutions
and other general entities, improving their management and developing of tools that generate positive effects on the environment and quality of life of people. The
main speaker in this summit was Mr. Joi Ito, MIT’s Media Lab Director.
A decrease in primary zones from 24 to 13 for domestic and international long distance services, which started in October of 2012, has resulted in lower domestic
traffic volumes. Note that in August 2014, the process of eliminating the 13 remaining primary zones related to long distance services was completed. These services represented 2% of the Group’s revenue for 2014.
During the second half of 2012, the Group leveraged from the level of development and convergence of its technologies launching the “Entel Hogar” project, which
is focused on providing wireless fixed telephony, Internet and satellite television solutions for certain segments in the residential market. As of December 31, 2014,
the Company achieved 276,000 UGI, growing 34% compared with December 2013.
110
With respect to the spectrum, after granting Block B of frequencies of the 2600MHz band (LTE, Long Term Evolution or 4G) to the subsidiary WILL S.A., concessionaire
of the Entel Group, in March the project committed in the concession decree was completed which authorized this project’s works in this frequency block. Also, and
within the framework of the tender, with respect to the obligatory locations that should be included according to this tender, and which implementation is 2 years
(up to march 2015), the concessionaire has already began the construction project acceptance, with a completion percentage at year-end of 80%of the obligations.
Additionally, with respect to the public tender to grant public service concession of data transmission in the 700MHz frequency bandwidth of October 2013, after the
tendering process, Entel was granted Block B of this frequency in March, which is the block with a higher spectrum. Currently, this granting is in process of obtaining
the final decree, after the Ministry solved the claim presented in favor of the claimants and also after the appeal presented was rejected by the Court of Appeals (in
conformity with the process established by the Law), which confirmed the rejections already issued by the Administrative Authorities.
This frequency, that different experts express is relevant for performing the telecommunication service offer, is special for high speed data transmission services
(LTE), as it allows complementing the LTE or 4G service offer with a higher penetration of the signal indoor and a wider coverage in rural areas.
With respect to this topic, a claim was filed with the Free Competition Tribunal (by one of the same companies that filed the abovementioned claim) arguing that such
tender did not generated favorable conditions for the competition as the spectrum was fully used and did no guarantee its efficient use. This claim is under review
by the Tribunal, and for now it has not generated the suspension of the administrative acts carried out at Subtel and/or the Controllership.
Internationally, the Group currently operates only in Peru, the market, resource requirements and management efforts of which are aligned to the current strategic
definitions. The Group’s business in Peru were traditionally focused on integrated fixed telephony services for corporate customers in Lima and local and international Call Center services, and has expanded to mobile telephony services through Entel Perú (former Nextel Perú).
On August 19, 2013, Entel Chile acquired Nextel Perú (currently Entel Perú), subsequent to the transfer of 100% of the shares to Entel by the U.S. Company NII Holdings. This transaction was announced on April 4, 2013 and amounted to US$410.6 million for the total share capital. In October 2014, the change of brand for the
mobile operation of such company was completed, changing the name to Entel Peru. This is the third largest mobile company in Peru, operating since 1998 and
focusing mainly on the corporate segment through the Push-To-Talk – IDEN technology, and 3G WCDMA services. Such acquisition is a significant step for Entel, as
it is a long-term investment that will allow positioning the Group as a global mobile carrier in a market with high potential. This market is undergoing a big technological change, where voice services evolve towards an intensive use of mobile data services. Such investment will allow increasing the number of services that
the Entel Group already offers in Peru.
On July 22, 2013, the Group was awarded in Peru one of the two 40 MHz blocks that the Peruvian authority submitted to a tender process for the development of
4G mobile services in the AWS band in Peru. For such purpose, Entel offered US$105.5 million. Such spectrum will allow developing 4G services that will integrate
with the rest of the Group’s supply in Peru, to efficiently supplement the existing infrastructure, generating an appropriate combination of quality and costs for the
rendering of services.
Entel Perú has restructured its business strategy to become a global mobile carrier, serving all costumer segments delivering a unique experience for them, in a
time of a significant technological evolution towards mobile data services. For such purpose, starting from the acquisition date, efforts have been focused on expanding the network, distribution channels and increasing the business and handset supply for the market.
111
During 2014, Entel Perú has focused its efforts in completing the milestones required to perform its business strategy in order to achieve a relevant position in the
market. For this, the Company restructured its internal function, encouraging the differentiation between corporate and personal customers, and has redesigned the
commercial and the costumer service offers. The Company has also expanded the distribution channels. Additionally, it is also developing projects to significantly
expand and strength the capacity and coverage of the current network and the different technologies (2G, 3G, 4G), for mobile voice and data services. Also, points of
sales and services have been doubled and the handset offer has been extended, incorporating the 2G technology to include the pre-paid market.
In October 2014, the change of brand for the mobile operation in Peru was completed, changing the name to Entel Peru, and an advertisement campaign was launched targeting all media in that country, and offering important promotions to attract high-value customers, focusing mainly on the portability of customers from
other carriers. As a result of such campaign, the company reached a base of 1,738,450 customers, growing 11% compared with December of last year.
Analysis of market risk
Market risks to which the Group companies are confronted are described in Note 28 to the consolidated financial statements.
Such note describes the technological, regulatory, currency, credit, interest rate and liquidity risks, as well as the control and mitigation policies applied. The continuous analysis of technology and market trends is strengthened through an alliance with the Vodafone Group, a British carrier and worldwide leader of mobile
services. Through this alliance, Entel Group, among other benefits, shares the best practice in customer service, has access to new voice and data products with
international access, is able to increase the Roaming service coverage and quality and maintain the leading position in the development of added-value services in
the area of Advanced Digital Mobile Telephony.
As indicated above, recognition of Entel by the market is evidenced by maintaining for 12 consecutive years in the first place in the Mobile Service Customer Satisfaction, as awarded by the Organización Pro Calidad and Revista Capital, and the recognition awarded by Cisco as the “Service Provider Partner of the Year” for the
Southern Cone of Latin America, because of the Group’s leading position as the most important carrier and systems integrator in Chile.
Services rendered by the Group locally have been the subject of several reforms and been enacted or substantially enacted by the authorities that will affect competition, accelerate Internet penetration and control the deployment of antennas in urban areas, set new tariffs for interconnection services, among other objectives.
As indicated in the notes to the financial statements, reforms include providing more information to users, destined to compare Internet access market offers,
eliminate domestic long distance, providing a consistent format for telephone numbers, processes for determining tariffs for services rendered through interconnections, among others. Likewise, the competition regulation agency has issued instructions for telecommunication companies establishing requirements for the
service supply differentiating the destination network (On net/Off net), as well as instructions that restrict and establish conditions for the supply of telecommunication service packages (within the same network or in different networks).
With respect to the tariff process, the ministries issued the Tariff Decree for Entel PCS and the other Mobile companies which, in summary, establishes access tariffs
of an average of Ch$15.6 per minute to be charged during 2014. This amount represents a reduction of approximately 75% compared with the previous 5-year period
(between 2009 and 2014). This Decree projects new reductions during the 5-year period.
Despite all the regulatory changes indicated above, the diversity and size of the Group hedge it against the effects of adverse regulations, and also create new business opportunities. However, within a regulated industry, changes in regulations have the potential to impact the Group’s profit or restrict its growth possibilities.
112
Evolution of revenues
The Group’s revenues are composed of the captions Revenue, Other income and Other gains (losses) in the Statement of Comprehensive Income. Income increased
by 1.5%, compared with 2013, as follows:
2014
2013
Variation
ThCh$
ThCh$
%
Mobile telephone service - Chile
1,150,532
1,271,726
-10
Mobile telephone service – Peru
151,729
45,902
231
Private services (including IT services)
136,842
120,663
13
Local telephone services (including NGN-IP)
50,568
43,160
17
Television service
18,020
8,337
116
Long distance
26,961
32,027
-16
Internet
24,097
20,879
15
22,988
20,868
10
Traffic business
28,080
31,255
-10
Americatel Peru
25,450
21,392
19
8,000
12,167
-34
Call center and other services
Other revenue (1)
Total revenue
24,784
15,555
59
1,668,052
1,643,930
1.5
(1) Other income, from the disposal of property, plant and equipment, business interests and other.
Consolidated revenues for the twelve-month period ended December 31, 2014 amounted to ThCh$1,668 million, representing an increase of 1.5% compared with
consolidated revenues in the same period of 2013, including 153 million from the operation of Entel Perú.
As observed, the growth in the Group’s revenue arises mainly from the addition of mobile services in Peru. Such mobile services, both in Chile and Perú, continue to
be the Group’s main source of revenues. Additionally, there is a steady increase in revenue from fixed networks associated with the corporate customer segment,
especially in the provision of integrated voice, data and internet solutions, as well as information technology services (IT).
The Group continues to leverage from a sound evolution of its high-value mobile customers, despite a slowdown in the industry in Chile in line with a less dynamic
economy. In Peru, Entel has focused its expansion on the network and distribution channels, as well as in expanding the handset and service supply.
In the area of mobile services, the Group in Chile has a strong positioning, due mainly to the sustained commercial drive and service quality, resulting in being preferred by users. Note that there was a decrease in revenue from mobile services due to the application in January of the new tariff decree that decreases mobile
termination rate, with the decrease of 75% in such tariffs. There was an increase in sales that offset this decrease in part, due to the growth in voice services and
innovative value-added services, resulting from an increase in the high-value customer base, and driven by the higher penetration of data services. Other offsetting
factors include revenue from integrated voice, data and internet solutions and IT in the corporate segment, as well as the positive development of revenue associated with the "Entel Hogar" product. As of December 31, 2014, customer portfolio was represented by 10,102,116 users, representing a decrease of 3% compared
with the same period of prior year. Note that 35% of such portfolio is composed of postpaid customers (voice and mobile broadband), which customer base grew by
4%, while the pre-paid customer base decreased by 6% affected mainly by fewer promotions after the reduction in the mobile termination rates mentioned above,
as well as a decrease in the mobile broadband customer portfolio because of the migration to other services due to the penetration of smartphones and the quick
adoption of data plans. Additionally, the mobile broadband pre-paid and post-paid customers included in the mentioned variations and corporate wireless data
customers reach 860,677 as of December 2014, a decrease of 14% compared to the same period of 2013.
113
In addition, revenue of ThCh$153 million was recognized in 2014 as a result of the addition of the subsidiary Entel Perú. As of December 31, 2014, this company has
a total customer base of 1,738,450 users and an average ARPU of Ch$8,252 at the same date.
Revenue from private services, related to integrated voice networks, data and Internet, provided to the corporate segment, together with Information Technology
services, have shown a positive evolution, driven by entering into new contracts with customers.
The growth in local telephony mainly relates to the telephony area associated with “Entel Hogar”, which as of December 31, 2014 reached 176,000 UGI.
The increase in television services relate to the satellite television segment associated with “Entel Hogar”, in line with the growth in UGI reaching 86,000, combined
with a competitive commercial offer and a continuous improvement in customer service and support.
A decrease has been shown by revenue from long distance services where revenue from international long distance services have decreased mainly due to a reduction in traffic in the consumer segment, which is mainly offset by an increase in tariffs and the business segment activity, as well as by a decrease in domestic
long distance services impacted by a reduction in the primary zones from 24 to 13, which commenced operating in October of the prior year. Additionally, in August
2014, the elimination of all the primary zones in Chile resulte3d in the decrease in revenue from domestic long distance.
Internet services increased because of the higher activity level in the business segment, as well as in “Entel Hogar” services relative to the mobile broadband service
segment, and additionally, because of the Internet service segment contributed by Entel Perú.
Revenue from services provided to other operators have decreased by 10% during the period, because of a drop in fixed network infrastructure leases, which is
partially offset by a decrease in the activity of international operators.
Traffic services decreased by 10%, due to a drop in the minutes used and lower tariffs
Additionally, Americatel Perú shows a positive variation of 19% mainly due to an increase in revenue related to integrated voice, data and Internet services for corporations and an increase in revenue in the online wholesale business due to higher traffic and tariffs. In addition, there is a growth due to the transfer of customers
of the NGN-IP service from Nextel Perú to Americatel, which is related to the type of service offered by the latter.
Call Center services show a decrease due mainly to the effect of the consolidation of the mobile service operation in Peru, as Entel Perú was a client before the
acquisition took place.
Other revenues showed presented a significant increase mainly due to revenue from the lease of property to other mobile operators, and higher net revenues from
the sale of technology equipment.
Costs, expenses and profitability
Information included below relates to the main cost and expense captions for 2014 and 2013:
2014
2013
Variation
ThCh$
ThCh$
%
(1,541,282)
(1,425,893)
8
Operating income (EBIT)
126,769
218,037
-42
- Net finance cost, adjustments and others
(78,313)
(41,120)
90
56,471
146,965
-62
Operating costs
Net profit
During 2014, consolidated operating cost amounted to ThCh$1,541 million, which corresponds to an increase of 8% compared to the same period of 2013.
114
Growth noted in operating costs is mainly due to the addition of the subsidiary Entel Perú, which recognizes higher costs of ThCh$284 million in 2014. When excluding this effect, costs decrease by 8% compared to each period, given mainly by the reduction in mobile termination rates.
Note that during 2013, the Company recognized the amount of ThCh$45 million related to depreciation expense and non-recurring retirements, associated with the
stock of post-paid handsets existing as of September 30, 2012, due to the new accounting treatment of mobile handsets under post-paid agreements. The depreciation of such historical basis ended in September 30, 2013.
Additionally, we noted an increase in payroll expenses and employee benefits, leases of sites, maintenance, outsourcing, and costs to sell handsets destined for
customer attraction and customer loyalty campaigns.
Finally, there is an increase in interest expenses related to a higher debt associated with the Group’s expansion plan, and higher expenses for readjustments resulting from a higher inflation on financial derivatives associated with the Company’s exchange rate hedging policy.
Profit before Tax
A decrease in profit before tax is mainly the result of the behavior noted in revenues and expenses as is described above.
On September 29, 2014, Law No. 20,780 was published in the Official Gazette of Chile, which introduced several amendments to the current income tax system and
other taxes. Among the main amendments is the progressive increase in the Corporate Tax to 27% starting from 2018, in the vent the partially-integrated system is
applied; in case the attributed income system is adopted, the maximum rate will reach 25% in 2017. As Entel S.A. is an openly-held corporation, the default system
applied to it is the partially-integrated, unless a future Shareholder’s Meeting agrees to opt for the attributed income system.
In this respect, in conformity with International Financial reporting Standards (IFRS), the impact such increase in the corporate tax rate has on the Company’s net
deferred tax assets should be recognized immediately in profit or loss. However, Circular No.856 of October 17, 2014 issued by the Superintendence of Securities
and insurance stated that the net differences in deferred taxes arising from the increase in the abovementioned tax rate should be accounted for in equity.
Assuming the application of the partially-integrated system, given no Shareholders’ Meeting has been held opting for the attributed income system, the application
of this increase in the corporate tax resulted in the direct recognition of a net credit for deferred taxes of ThCh$9,864 in equity. The income tax rate determined as
of December 31, 2014, includes the increase in the tax rate from 20% to 21%.
In July 2014, Entel placed corporate bonds in the local and international market, for UF7,000,000 to 21 years and US$800,000,000 to 11.5 years, respectively.
The funds collected in both issues are intended mainly to prepay the debt and finance the Company’s investment plan.
II. COMMENTS ON THE STATEMENT OF CASH FLOWS
During 2013 and 2012, the behavior of cash-generating sources in each activity is described below.
We noted an increase of ThCh$72 million in net cash receipts from operating activities from ThCh$400 million to ThCh$472 million or 18%.
The increase in operating activities was mainly due to an increase in Cash receipts from customers by ThCh$104 million (6%), compared to the increase in Employee
payments and Other payments for operating activities, which in aggregate increased by ThCh$66 million (27%).
115
In addition, an increase in investing activities is noted due to a decrease in cash payments of ThCh$150 million, from ThCh$693 million to ThCh$542 million, compared with the same period of prior year. This decrease is mainly due to the acquisition in 2013 of Nextel Perú, and the award of the 4G license in Peru, which increased
expenses from investing activities during such period.
Cash flows from financing activities recorded an increase in cash receipts of ThCh$158 million, mainly due to the decrease in the captions Loan Payment by
ThCh$305 million, compared to the decrease in Cash receipts from short-term and long-term loans, which decreased by ThCh$199 million.
As a result of those movements referred to above, cash at the end of each period recognized in the caption “Cash and cash equivalents” increased from ThCh$19
million to ThCh$379 million, maintaining volumes that successfully cover the Group’s cash flow planning
III. COMMITMENT COMPLIANCE
Through to the present date, the Group’s companies have complied with all its obligations with third parties.
116
Hechos Relevantes Consolidados 2014
De conformidad a las normas legales y reglamentarias vigentes, las Sociedades del Grupo durante el año 2014 informaron a la Superintendencia de Valores y
Seguros, en calidad de hecho esencial o información relevante, lo siguiente:
I. Sociedad Matriz – Citación Junta de Accionistas. Reparto de utilidades (pago de dividendos).
Por carta N°05 de fecha 8 de abril de 2014, se informó que en sesión de Directorio de 7 de abril de 2014 se acordó lo siguiente:
a.Citar a Junta Ordinaria de accionistas a celebrarse el martes 29 de Abril de 2014, cuya citación y demás antecedentes se le remitirán oportunamente a
los señores accionistas y demás organismos competentes conforme a la normativa legal y
b.Proponer a la Junta Ordinaria de Accionistas distribuir de las utilidades del ejercicio un dividendo definitivo de $300 por acción, al cual se debe descontar
la suma de $150 por acción correspondiente al dividendo provisorio que se repartiera en diciembre de 2013, restando en consecuencia por repartir un
dividendo de $150 en la fecha a determinar por la Junta Ordinaria de Accionistas.
II. Sociedad Matriz - Aprobación Memoria 2013, distribución dividendo y otros.
Por carta N°07 de fecha 29 de abril de 2014, se informó que la Junta Ordinaria de Accionistas celebrada el día 29 de abril de 2014, acordó:
a.Aprobar la Memoria, Balance y Estado de Resultados del ejercicio del 2013
b.Distribuir como dividendo definitivo la suma de $300 por acción, equivalentes a un 48,28% de la utilidad líquida del ejercicio. Respecto de este reparto,
al descontar el dividendo provisorio de $150 pagado en diciembre de 2013, deja un saldo por pagar como dividendo definitivo de $150 por acción, el que
se efectuará a contar del miércoles 28 de mayo de 2014.
c.c.- Se aprobó la política de inversión y financiamiento, y se informó la política de dividendos.
d.d.- Se eligieron como directores de la sociedad a los señores Juan Hurtado Vicuña, Bernardo Matte Larraín, Luis Felipe Gazitúa Achondo, Richard Büchi
Buc, Juan José Mac Auliffe Granello, Juan Bilbao Hormaeche, Andrés Echeverria Salas, Raúl Alcaíno Lihn, y Alejandro Pérez Rodríguez, siendo los primeros ocho directores propuestos por el grupo controlador, revistiendo el carácter de independiente el último de los nombrados.
e.Se mantuvo la remuneración de los directores y del Comité de directores que se aprobaran en la anterior Junta Ordinaria de Accionistas y se fijó el
presupuesto anual del Comité, se aprobó la designación de auditores externos de la firma KMPG, se mantuvo la designación de inspectores de cuentas
titulares y suplentes, se designó a los clasificadores de riesgos de Fitch Ratings e ICR (International Credit Rating), se mantuvo la designación del diario
El Mercurio de Santiago para la publicación de avisos sociales y finalmente, se informaron las operaciones relacionadas.
117
I. Sociedad Matriz – Otros
Por carta N°09 de fecha 5 de mayo de 2014, se informó que en sesión de Directorio de 5 de mayo de 2014 se acordó lo siguiente:
c.Se constituyó la mesa del directorio de la Empresa Nacional de Telecomunicaciones S.A., eligiéndose como Presidente a don Juan Hurtado Vicuña y
como Vicepresidente a don Luis Felipe Gazitúa Achondo.
d.Se constituyó el Comité de Directorio en la forma prevista en el artículo 50 de la Ley de Sociedades Anónimas, quedando integrado por los Directores
Alejandro Pérez Rodríguez, Luis Felipe Gacitúa Achondo y Richard Buchi Buc.
II. Sociedad Matriz – Colocación de valores en mercados internacionales y/o nacionales
Por carta de fecha 10 de julio de 2014, se comunica la siguiente información en carácter de hecho esencial:
Con fecha 10 de julio de 2014, la Compañía ha procedido a colocar bonos en el mercado local, por un monto total de 7.000.000 UF (siete millones de Unidades de
Fomento) (los “Bonos”). Los Bonos, cuya denominación corresponde a la serie M, se emitieron con cargo a la línea de bonos inscrita en el Registro de Valores de la
Superintendencia de Valores y Seguros con el N° 675, inscrita con fecha 24 de agosto de 2011, inscripción que fue modificada en conformidad a anotación de fecha
30 de junio de 2014.
Los Bonos devengarán una tasa de interés de carátula de 3,50% anual, y dichos intereses serán pagaderos semestralmente a partir del día 30 de noviembre de
2014, durante un periodo de 21 años y hasta su total vencimiento. Hago presente asimismo que la emisión alcanzó una tasa de colocación de 3,53%.
El instrumento fue clasificado en categoría AA- por Fitch Ratings y AA+ por ICR.
En cuanto al uso de los fondos recaudados, puedo informarle que ellos serán destinados al refinanciamiento de pasivos.
Finalmente, la administración de la Compañía estima que la colocación de bonos a que se ha hecho referencia, no tendrá efectos significativos en su estado de
resultado.
III. Sociedad Matriz – Colocación de valores en mercados internacionales y/o nacionales
Por carta N°C-14 de fecha 17 de julio de 2014, se comunica la siguiente información en carácter de hecho esencial :
En la ciudad de Nueva York, con fecha 17 de julio de 2014, la Compañía ha procedido a colocar bonos en el mercado internacional, por un monto total de US$
800.000.000 (ochocientos millones de dólares, los “Bonos”). Los Bonos se colocaron en dólares, con un plazo de vencimiento promedio de 11,5 años y a una tasa
de colocación de 4,78%.
La colocación de bonos 144A/RegS se llevó a cabo tras la realización de un road show internacional con potenciales inversionistas en las ciudades de Los Angeles,
Chicago, Boston y Nueva York de los Estados Unidos y en Londres.
La emisión de esos bonos internacionales fue clasificada en categoría Baa2 por Moody´s, BBB por S&P y BBB+ por Fitch Ratings.
Los recursos recaudados con la emisión de esos bonos internacionales se destinarán principalmente al prepago de deuda y financiamiento del plan de inversiones
de la compañía.
118
IV- Sociedad Matriz – Reparto de utilidades (Pago dividendos)
Por carta N°16 de fecha 4 de noviembre de 2014, se informa en calidad de hecho esencial lo siguiente:
En sesión de directorio de 3 de Noviembre de 2014, el Directorio de la Empresa Nacional de Telecomunicaciones S.A. acordó pagar un dividendo provisorio de $ 80
(ochenta pesos) por acción, a contar del jueves 11 de Diciembre de 2014, con cargo a las utilidades acumuladas al tercer trimestre de este año.
El pago de dicho dividendo provisorio ascenderá a la suma total de M$ 18.921.896 (dieciocho mil novecientos veintiún millones ochocientos noventa y seis mil
pesos), representativa de un 29,46% de las utilidades acumuladas al tercer trimestre de 2014.
IV. Sociedad Matriz – Cambio en la Administración
Por carta N°17 de fecha 23 de diciembre de 2014 se informa en carácter de hecho esencial la renuncia de don Juan Bilbao Hormaeche al cargo de Director de la
Sociedad a contar de esta misma fecha.
De acuerdo a los estatutos sociales en la próxima sesión de Directorio se podrá por éste designar al reemplazante, quién durara en sus funciones hasta la próxima
junta ordinaria de accionistas, oportunidad en la cual se realizará la renovación del Directorio.
119
120
_ Certificate of Accounts Inspectors
Dear shareholders
Empresa Nacional de Telecommunicaciones S.A
We have reviewed the Individual and Consolidated Financial Statements of Empresa Nacional de Telecomunicaciones S.A. for the twelve
month period ending Tuesday, December 31, 2014. There are no remarks to be made following our review. Our examination and review as
Account Inspectors included verification of the account balance in the General Ledger and summary sheet of the Consolidated Financial
Statements with the corresponding accounts on the Balance Sheet and the Income Statement on this date
MANUEL ONETO FAURE
GUSTAVO MATURANA RAMIREZ
Inspector de Cuentas
Inspector de Cuentas
Santiago, enero 29 de 2015.
121
3.
SUBSID
IARY
AND AFFIL
IATE_
COMP
ANIES
122
123
Consolidated Balance Sheets for Subsidiaries
As of December 31, 2014 and 2013
(CLP thousand)
Entel PCS Telecomunicaciones S.A. &
Entel Telefonía Local S.A. & subsidiaries
subsidiary
12/31/14
12/31/13
12/31/14
12/31/13
12/31/14
12/31/13
12/31/14
Entel Servicios Empresariales S.A. (1)
12/31/13
12/31/14
12/31/13
ASSETS
Current assets
268,400,286
384,709,430
29,206,697
18,390,706
328,553
551,976
257,917
197,858
-
412,171
Noncurrent assets
764,641,457
678,039,737
21,198,691
21,892,183
1,101,045
439,612
2,259,054
2,293,338
-
832,122
1,033,041,743
1,062,749,167
50,405,388
40,282,889
1,429,598
991,588
2,516,971
2,491,196
-
1,244,293
463,533
TOTAL ASSETS
LIABILITIES
Current liabilities
264,746,996
321,729,087
18,349,760
16,896,442
214,603
218,584
176,499
328,066
-
Noncurrent liabilities
325,426,250
336,355,850
13,024,440
11,974,182
944
-
-
-
-
TOTAL LIABILITIES
590,173,246
658,084,937
31,374,200
28,870,624
215,547
218,584
176,499
328,066
-
463,533
NET EQUITY
Paid-in capital
128,398,586
128,398,586
29,603,142
29,603,142
1,413,277
1,413,277
4,141,580
4,141,580
-
737,071
Other reserves
(51,083,919)
(49,856,839)
(2,419,357)
(2,419,357)
(115,502)
(115,502)
(338,476)
(338,476)
-
125,983
Retained earnings (cumulative losses)
365,520,608
326,093,279
(8,162,189)
(15,770,976)
(83,724)
(524,771)
(1,462,632)
(1,639,974)
-
(82,294)
33,222
29,204
9,592
(544)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,033,041,743
1,062,749,167
50,405,388
40,282,889
1,429,598
991,588
2,516,971
2,491,196
-
1,244,293
Non-controlling stock
Conversion reserves
TOTAL LIABILITIES AND NET EQUITY
-
Summary Statements of Comprehensive Income for Subsidiaries
For the years ended December 31, 2014 and 2013
(CLP thousand)
subsidiary
12/31/14
1,161,434,683
1,285,102,033
132,408,229
87,701,224
739,669
887,555
169,900
177,714
-
81,151,730
42,689,182
692,686
354,614
109,864
50,174
216,683
142,470
-
-
(63,070,501)
(55,490,934)
(1,348,846)
(2,024,807)
(53,820)
(387,893)
-
-
-
(4,204,643)
Depreciation and amortization
(127,542,206)
(165,484,253)
(1,720,454)
(1,370,340)
-
-
-
-
-
-
Other operating costs (various)
(892,360,586)
(946,592,553)
(119,127,077)
(80,903,325)
(259,219)
(290,100)
(209,241)
(180,955)
-
(97,154)
Staff costs
12/31/13
12/31/14
S.A. (1)
12/31/13
Other operating revenue
12/31/14
Entel Servicios Empresariales
12/31/14
Ordinary revenue
12/31/13
12/31/13
12/31/14
12/31/13
4,552,420
Profit (loss) before tax
159,613,120
160,223,475
10,904,538
3,757,366
536,494
259,736
177,342
139,229
-
250,623
Revenue (expenditure) for corporation tax
(24,417,405)
(29,117,390)
(2,773,975)
(1,106,527)
(94,975)
(47,117)
-
-
-
6,522
PROFIT (LOSS)
135,195,715
131,106,085
8,130,563
2,650,839
441,519
212,619
177,342
139,229
-
257,145
Earnings (losses) attributable to holders of stock instruments in net shareholder equity of the controller
135,190,069
131,099,800
8,131,155
2,651,607
441,519
212,619
177,342
139,229
-
257,145
5,646
6,285
(592)
(768)
-
-
-
-
-
-
135,195,715
131,106,085
8,130,563
2,650,839
441,519
212,619
177,342
139,229
-
257,145
1,686.04
1,635.02
468.21
152.69
136,271.46
65,623.12
17,734.20
13,922.90
-
7,471.03
Earnings attributable to non-controlling shares
PROFIT (LOSS)
EARNINGS PER SHARE
Ordinary shares
NOTES: The subsidiary Entel Call Center S.A. consolidates the financial statements of Contact Center S.A., Call Center del Perú S.A. and, from October 2014, Entel Servicios Empresariales S.A. As
such, the Income and Cash Flows of the latter only correspond to the period between October 1 and December 31, 2014. (2) The company Nextel del Perú S.A. was acquired by Entel S.A. on August 19,
2013, with 90% direct ownership and 10% indirect ownership through its subsidiary Entel Inversiones. As a result, its Income and Cash Flow statements correspond to the period between September
1 and December 31, 2013. On September 25, 2014, it changed its business name to Entel Perú S.A.
(1)
124
Entel Inversiones S.A. & subsidiary
12/31/14
Entel Call Center S.A. & subsidiaries (1)
Entel Perú S.A (formerly Nextel del Perú S.A.) (2)
Entel Internacional BVI Corp. & subsidiary
12/31/13
12/31/14
12/31/13
12/31/14
12/31/13
12/31/14
Empresa de Radiocomunicaciones Insta Beep Ltda.
12/31/13
12/31/14
12/31/13
6,090,224
4,659,284
13,001,311
13,852,429
126,418,719
115,208,682
25,989
25,016
3,945
3,738
40,935,404
96,930,567
18,160,273
16,319,710
510,095,882
244,143,106
242,174
211,233
-
-
47,025,628
101,589,851
31,161,584
30,172,139
636,514,601
359,351,788
268,163
236,249
3,945
3,738
7,271,468
59,153,239
6,258,380
7,963,808
202,414,483
56,310,272
-
35,298
788,484
744,254
7,249,393
3,672,300
16,464,652
14,602,262
322,497,929
101,412,786
-
-
-
-
14,520,861
62,825,539
22,723,032
22,566,070
524,912,412
157,723,058
0
35,298
788,484
744,254
2,870,847
2,870,847
13,867,175
13,867,175
175,833,863
380,007,494
25,211,353
25,211,353
2,969,432
2,969,432
1,111,863
564,342
(2,295,029)
(1,128,331)
13,276,964
6,692,632
5,055
5,000
(242,681)
(242,681)
20,992,231
29,190,875
(3,140,647)
(5,138,432)
(77,508,638)
(185,071,396)
(24,948,245)
(25,015,402)
(3,511,290)
(3,467,267)
7,529,826
6,138,248
7,053
5,657
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,025,628
101,589,851
31,161,584
30,172,139
636,514,601
359,351,788
268,163
236,249
3,945
3,738
Entel Perú S.A (formerly Nextel del Perú S.A.) (2)
12/31/14
12/31/13
12/31/14
Empresa de Radiocomunicaciones Insta Beep Ltda.
12/31/14
12/31/13
12/31/14
12/31/13
28,453,484
21,965,883
42,601,877
36,259,981
153,172,432
47,025,737
39,328
12/31/13
-
-
-
326,462
492,134
460,318
22,403
4,410,563
1,349,181
31,376
16,366
-
-
(5,402,749)
(4,331,140)
(24,692,228)
(19,796,281)
(46,744,249)
(12,898,747)
-
-
-
-
(3,148,571)
(2,351,113)
(1,586,701)
(1,456,227)
(22,487,298)
(6,329,588)
-
-
-
-
(26,802,722)
(15,287,512)
(14,548,043)
(13,241,442)
(225,005,498)
(47,983,849)
(3,547)
-
(44,023)
(16,479)
-
-
(6,574,096)
488,252
2,235,223
1,788,434
(136,654,050)
(18,837,266)
67,157
16,366
(44,023)
(16,479)
(744,843)
(524,348)
(265,368)
(387,343)
44,410,367
5,651,180
-
-
-
-
(7,318,939)
(36,096)
1,969,855
1,401,091
(92,243,683)
(13,186,086)
67,157
16,366
(44,023)
(16,479)
(8,196,466)
(506,811)
1,968,623
1,400,278
(92,243,683)
(13,186,086)
67,157
16,366
(44,023)
(16,479)
877,527
470,715
1,232
813
-
-
-
-
-
-
(7,318,939)
(36,096)
1,969,855
1,401,091
(92,243,683)
(13,186,086)
67,157
16,366
(44,023)
(16,479)
(739,086.21)
(45,699.82)
207.20
147.38
(107.75)
(6.65)
1.11
0.27
0.00
0.00
125
12/31/14
12/31/13
Summary Cash Flow Statements for Subsidiaries
(CLP thousand)
subsidiary
12/31/14
12/31/13
12/31/14
12/31/13
Cash flow from (used in) operations
211,798,595
174,304,065
11,167,730
11,804,706
508,587
445,614
(117,796)
(49,521)
Cash flows from (used in) other operating activities
(38,523,099)
(61,870,536)
(3,289,799)
(2,000,692)
143,328
(58,734)
-
-
Net cash flows from (used in) operating activities
173,275,496
112,433,529
7,877,931
9,804,014
651,915
386,880
(117,796)
(49,521)
Net cash flows from (used in) investment activities
(85,516,932)
(8,855,208)
(1,255,697)
(832,540)
-
-
117,093
49,766
Net cash flows from (used in) financing activities
(88,324,630)
(101,816,097)
(6,722,151)
(8,614,964)
(651,802)
(434,542)
-
-
(566,066)
1,762,224
(99,917)
356,510
113
(47,662)
(703)
245
Effects of foreign currency variations on cash and cash equivalents
-
-
-
-
-
-
-
-
Effects of changes of the scope of consolidation on cash and cash equivalents
-
-
-
-
-
-
-
-
Cash and cash equivalents, statement of cash flow, initial balance
3,579,319
1,817,095
619,241
262,731
968
48,630
4,236
3,991
Cash and cash equivalents, statement of cash flow, final balance
3,013,253
3,579,319
519,324
619,241
1,081
968
3,533
4,236
Net increase (decrease) in cash and cash equivalents
12/31/14
12/31/13
12/31/14
12/31/13
Statement of Changes in Equity of Subsidiaries
(CLP thousand)
Entel PCS
Telecomunicaciones S.A. & subsidiaries
Initial balance for current period 01/01/2014
404,664,230
11,412,265
773,004
2,163,130
Income from comprehensive income and expenditure
135,195,715
8,130,563
441,519
177,342
(104,879,840)
-
-
-
Distribution of dividends
Increase (decrease) for other distributions to owners
9,117,165
-
-
-
(1,228,773)
(511,640)
(472)
-
Final balance for current period 12/31/2012
442,868,497
19,031,188
1,214,051
2,340,472
Initial balance for previous period 01/01/2013
376,526,854
8,761,202
560,385
2,023,901
Income from comprehensive income and expenditure
131,106,085
2,650,839
212,619
139,229
(101,719,620)
-
-
-
-
-
-
-
(1,249,089)
224
-
-
404,664,230
11,412,265
773,004
2,163,130
Other increases (decreases) in net equity
Distribution of dividends
Increase (decrease) for other distributions to owners
Other increases (decreases) in net equity
Final Balance for previous period 12/31/2013
NOTES: (1) The subsidiary Entel Call Center S.A. consolidates the financial statements of Contact Center S.A., Call Center del Perú S.A. and, from October 1, 2014, Entel Servicios Empresariales S.A. As
such, the Income and Cash Flows of the latter only correspond to the period between October 1 and December 31, 2014.
(2)
The company Nextel del Perú S.A. was acquired by Entel S.A. on August 19,
2013, with 90% direct ownership and 10% indirect ownership through its subsidiary Entel Inversiones. As a result, its Income and Cash Flow statements correspond to the period between September
1 and December 31, 2013. On September 25, 2014, it changed its business name to Entel Perú S.A.
126
12/31/14
12/31/13
12/31/14
Entel Perú S.A (formerly Nextel del Perú
12/31/13
12/31/14
12/31/13
12/31/14
12/31/13
Empresa de Radiocomunicaciones Insta
S.A.) (2)
12/31/14
Beep Ltda.
12/31/13
12/31/14
12/31/13
-
(1,149,823)
5,028,145
59,379,065
2,075,016
1,619,675
230,211,399
(28,850,542)
(2,368)
0
(2,139)
(1,608)
-
-
-
-
-
-
-
-
(359)
(330)
-
-
-
(1,149,823)
5,028,145
59,379,065
2,075,016
1,619,675
230,211,399
(28,850,542)
(2,727)
(330)
(2,139)
(1,608)
-
-
(7,264,676)
(79,993,529)
(2,554,216)
(2,892,850)
(226,502,140)
(18,614,269)
-
-
-
-
-
1,152,233
2,798,380
20,888,796
310,995
1,171,903
(4,965,892)
28,569,841
-
-
2,139
1,608
-
2,410
561,849
274,332
(168,205)
(101,272)
(1,256,633)
(18,894,970)
(2,727)
(330)
-
-
-
-
88,746
(2,824)
25,148
7,512
230,964
6,629,180
3,700
2,114
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30
1,082,709
811,201
331,571
425,331
2,804,626
15,070,416
25,016
23,232
-
-
2,440
1,733,304
1,082,709
188,514
331,571
1,778,957
2,804,626
25,989
25,016
-
-
-
Entel Perú S.A (formerly Nextel del Perú
Empresa de Radiocomunicaciones Insta
S.A.) (2)
Beep Ltda.
-
38,764,312
7,606,069
201,628,730
200,951
(740,516)
-
(7,655,548)
1,970,019
(92,243,683)
67,157
(44,023)
-
-
-
-
-
-
-
-
-
2,217,142
-
-
1,396,003
(1,137,536)
-
55
-
-
32,504,767
8,438,552
111,602,189
268,163
(784,539)
523,615
38,150,373
6,196,773
208,122,184
184,519
(724,037)
257,145
(36,096)
1,401,091
(13,186,086)
16,366
(16,479)
-
-
-
-
-
-
-
-
-
6,692,632
-
-
-
650,035
8,205
-
66
-
780,760
38,764,312
7,606,069
201,628,730
200,951
(740,516)
127
_ Subsidiaries of Entel S.A.
Company name
Legal status
Entel PCS Telecomunicaciones S.A. & subsidiaries
Closely-held corporation, registered in the Special Register
of Reporting Entities (No. 33).
Entel Telefonía Local S.A. or Entel Phone S.A. & subsidiaries
Closely-held corporation.
Incorporated as a corporation by public deed on October 3,
1996, in accordance with the laws of the Republic of Chile.
Incorporated as a corporation by public deed on April 29,
On December 20, 1994, by Supreme Decree 450, the Ministry
of Transport and Telecommunications awarded a public
telephone service concession to the company to install,
operate, and run a local telephone system.
Business purpose
The study, construction and operation of a system to provide
a full range of transmission, switching, communication,
metering, billing and charging services for mobile
telecommunications.
Satisfy the telephone, multimedia and infrastructure needs of
high-use consumers.
The import, export, marketing, distribution, sale, leasing
and provision in any other form of all types of equipment
required to provide mobile communications, together with
complementary and supplementary services.
Provide sales and dealership services for communication
equipment.
Undertake any business activities related to
telecommunications.
In general, all types of activities, including agreeing, signing
and executing all types of contracts, required to provide any
type of mobile telecommunications services.
Subscribed and paid-in capital, December 31, 2014
CLP 128,398,586 thousand
Direct and indirect share in Entel S.A.
Entel Chile S.A.: 99.999%
Entel Inversiones S.A.: 0.001%
Percentage of investment in Entel S.A. assets
17.21%
0.73%
Income for 2014
Board of Directors
Richard Büchi B., Chairman
Juan Hurtado V., Vice Chairman
Luis Felipe Gazitúa A., Director
Alfredo Parot D., Director
Felipe Ureta P., Director
Antonio Büchi B., Chairman
Juan Baraqui A., Director
José Luis Poch P., Director
Antonio Büchi B.
Mario Nuñez P.
Positions held at Entel S.A.
Alfredo Parot D., Vice President of Technology and Operations
Felipe Ureta P., Finance and Management Control Executive
Antonio Büchi B., CEO
Juan Baraqui A., Risk and Management Executive
José Luis Poch P., Vice President of Consumer Segment
Mario Nuñez P., Vice President Enterprise Segment
Business relationship with Entel Chile S.A.
Provides network infrastructure to increase the coverage
of its fixed telecommunications services. // Receives
telecommunications services to support its mobile
communications operations.
Provides the services required to complement its integrated
solutions and operational continuity services.
Receives national signal transport services in dedicated
and switched mode from Entel Chile S.A. (CLP 104,214,944
thousand).
Leases or sub-leases physical space in buildings, stores,
and radio stations from Entel Chile S.A. or third parties and
receives marketing consultancy services, telephone technical
services, and data center services from Entel Chile S.A.
(CLP 19,773,605 thousand). Provides infrastructure leasing,
telecommunications services, and the payment of access
charges to Entel Chile S.A. (CLP 9,200,148 thousand).
Receives the annual leasing of telecommunications
infrastructure and installation services, provision of operation
and maintenance services for networks, leasing or subleasing of physical space in buildings and commercial
premises, IT data processing services, network administration
and administration services from Entel Chile S.A. (CLP
21,460,809 thousand).
Agreements and contracts
128
Receives operation and maintenance services for network
platforms that support its business activities.
Provides telecommunications services and access charges to
Entel Chile S.A. (CLP 2,728,369 thousand).
Company name
Entel Perú S.A (formerly Nextel del Perú S.A.)
Entel Call Center S.A. & subsidiaries
Legal status
International subsidiary.
Formerly Nextel Perú, incorporated as a corporation by public
deed on December 30, 1987, in accordance with the laws of
the Republic of Peru.
Formerly Entel Internacional S.A., incorporated as a
corporation by public deed on September 12, 1989, in
accordance with the laws of the Republic of Chile. Its
initial purpose was to provide consultancy services for
telecommunications and IT projects. Its business purpose was
amended on March 29, 2000.
Business purpose
The provision of telecommunications end-user and valueadded services, including trunked service, push-to-talk
services, transmission services, the storage and processing of
data and any other telecommunications services in line with
Peruvian legislation.
The development, installation, operation and running of its
own and third-party telecommunications platforms in Chile
and abroad.
Activities related to the acquisition, installation, sale and
maintenance of telecommunications equipment and the
supply of related services.
Activities or services provided through telecommunications
equipment or installations served by operators or automated
operations.
Direct and indirect share of Entel S.A.
3.87%
0.30%
Income for 2014
(CLP 92,243,683 thousand)
Board of Directors
Richard Büchi B., Director
Juan Hurtado V., Director
Luis Felipe Gazitúa A., Director
Luis Julian Martín Carranza U., Director
Carmen Rosa Graham A., Director
Julian San Martín A., Director
Mario Nuñez P., Director
Sebastián Dominguez P.
Alexis Licci P.
Julian San Martín A., Vice President of Corporate Segment
Business relationship with Entel S.A.
None.
Provides the infrastructure required for services via remote
channels for customers of subsidiaries of the Entel Group.
Receives telecommunications services to support its call
center business.
There were no agreements or contracts with a significant
influence on operations and income.
Receives telecommunications, administration and IT services,
and the leasing of office space from Entel Chile S.A. (CLP
428,605 thousand).
Provides inbound and outbound call services to Entel Chile
S.A. (CLP 9,275,425 thousand).
129
Company name
Entel Inversiones S.A. & subsidiaries
Entel International BVI Corp. & subsidiary
Legal status
International subsidiary.
Incorporated as a corporation by public deed on August 8,
Incorporated as a corporation on February 12, 1993, in
Tortola, the British Virgin Islands.
Business purpose
Making strategic investments in line with corporate objectives,
regardless of their relationship to the telecommunications
business.
Making strategic foreign investments for Entel.
Entel International BVI Corp. 0.01%
0.82%
0.01%
Income for 2014
(CLP 7,318,939 thousand)
CLP 67,157 thousand
Board of Directors
Cristián Maturana M., Director
Richard Büchi B., Chairman
Antonio Büchi B., Director
Felipe Ureta P.
Felipe Ureta P.
Cristián Maturana M., Legal Executive
Reciprocal provision of international communications
transport and termination services.
None.
Receives international data transportation and traffic
termination services from Entel Chile S.A. (CLP 1,173,174
thousand).
There were no agreements or contracts with a significant
influence on operations and income.
Provides Entel Chile S.A. with international traffic termination
services and the sale of services (CLP 1,139,056 thousand).
130
Company name
Micarrier Telecomunicaciones S.A. or Micarrier S.A.
Legal status
Incorporated as a corporation by public deed on December 30, 1988, in accordance with the laws of the Republic of Chile.
Formerly known as Entel Servicios de Datos S.A. until march 26, 1996 when it amending its articles of incorporation to change
its name.
Business purpose
The installation, operation, running and provision of public and private telecommunications services at national and
international level, both directly and through third parties.
0.09%
Income for 2014
CLP 177,342 thousand
Board of Directors
Mario Nuñez P., Director
Juan Baraqui A., Director
Pablo Pfingsthorn O.
Juan Baraqui A., Risk and Management Executive
Pablo Pfingsthorn O., Head of Department for Financial Planning and Management Control
Receives network administration, operation and maintenance services.
Provides long distance national and international services.
Receives operation and maintenance services for telephone exchanges and switching equipment, administration and computer
services, and the leasing of offices from Entel Chile S.A. (CLP 72,354 thousand).
131
Printing
Ograma
Design
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