Empresa de Telecomunicaciones
de Bogotá, S.A., E.S.P.
Financial Statements for the Years Ended
December 31, 2014 and 2013 and Statutory
Auditor's Report
EMPRESA DE TELECOMUNICACIONES DE BOGOTÁ S.A. E.S.P.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In thousands of Colombian Pesos (COP) except where otherwise indicated)
1.
ECONOMIC ENTITY AND OPERATIONS
Corporate Purpose and Regulatory Framework - Empresa de Telecomunicaciones de Bogotá S.A.
E.S.P. (hereafter “the Company” or “ETB”) is a joint-stock company organized as a public
utility company under Colombian law. Its majority shareholder is the Capital District. The
duration of the Company is undefined.
The company runs its own telecommunications network in Bogotá D.C., which consists of:
providing local and long distance telephone services, added value (including Internet and
broadband services), mobile services, interconnection, transport and connectivity carriers,
public telephone services and varying satellite and TV services. The telecommunications
industry in Colombia is regulated by the government in order to promote universal service with
the highest quality standards, consumer protection and fair competition.
The company has made several alliances with its subsidiary Colvatel S.A. E.S.P., among others,
to develop and improve broadband access solutions.
2.
RELEVANT EVENTS
a.
Pension Liability Transfer – By means of Minutes 240 / December 7, 2012 and 260 / May 28,
2013, the Company's Board of Directors approved the full transfer of the pension liability.
In compliance with Article 12 of Decree 1260 / 2000, ETB requested a positive review from
the Department of Labor, issued through Communication No. 62663 / May 3, 2012, which
took effect on October 21, 2013, indicating that the pension transfer could be executed as a
life annuity. The approval of the actuarial valuation and pension transfer authorization were
handed down by the Superintendence of Companies through Communications No. 320166538 / November 30, 2011 and No. 300-029845 / May 16, 2012, which took effect on
October 29, 2013 according to Communication No. 302-153193.
Framework contract for the standardization of the pension liability (total pension transfer
insurance policy) - On July 31, 2013, ETB signed a pension transfer agreement with Positiva
Compañía de Seguros S.A. to standardize the Company's pension liability through total
pension transfer insurance policy, for individuals whose pensions, on the date that the contract
was signed, represented specific liabilities that must be paid by ETB. The Company's
objective with the pension liability transfer is to strengthen its strategic vision, improve
financial indicators and ensure the payment to its retirees or their substitutes, by handing over
funds to an entity specializing in this field.
The objective of the agreement signed is to regulate relations between ETB and Positiva
resulting from the total pension liability transfer; through ETB's transfer of the risk to Positiva
by signing a pension transfer insurance policy for the obligation to pay the regular and
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additional monthly pensions (months 13 and/or 14) of the legal retirement pensions, bonuses
by treaty provision or mutual agreement resulting from early retirement plans, pensions
ordered by law and the corresponding substitution thereof, as well as funeral benefits for full
retirees or retirees paid exclusively by the Company.
The pension arrangements included in the transfer are: a) Retirees with a shared pension, b)
Retirees expecting a pension from the general pension system, c) Retirees paid exclusively by
the Company, d) Beneficiaries for life and e) Temporary beneficiaries.
Value - An initial value was established for the transaction at COP 1,375,000,000 for the
purposes of issuing the pension transfer insurance policy. This value consists of the value of
the actuarial valuation as at August 31, 2013 for COP 1,231,411,397 and the premium paid to
the Insurance Company, corresponding to 11.66% of the total liability transferred for COP
143,588,603, which covers any risks arising from ETB's pension liability. As at December 31,
2013, the premium of 11.66% for COP 143,588,603 and the balance from adjusting the
pension liability to reflect 100% of the transfer calculation value for COP 218,314,954 were
entered by the Company as a deferred asset to be amortized in 16 years; on December 31,
2014, the Company decided to amortize this item in a 2-year period sustaining its decision
through Decree 4565 / 2010. (See Note 3 (a) and Note 11 (6)).
In September 2013, the Stand-alone Trust established by the Company specifically to fund the
pension liability was liquidated and the funds for COP 1,188,197,689 plus cash funds for
COP 186,802,311 were transferred to the Insurance Company as a consideration for the
transfer agreement.
In addition, the agreement established a period of 180 calendar days to validate the
information based on which the risk was assessed to determine the initial premium, if any
inconsistencies are found the adjustment resulting from the review could not exceed the value
of COP 50,000,000. During the transfer adjustment period, a total of COP 16,144,969 was
paid and new retirees were transferred for COP 1,006,295. (See Note 11 (6)).
b. 4G Mobile Services Project - The purpose of this project is to develop and implement the
mobile operation at ETB using new fourth generation technologies. In addition, it intends to
integrate mobility services in the service portfolio (packaging fixed and mobile services)
based on the premises of quality and timeliness as required.
On May 8, 2013, COLOMBIA MÓVIL S.A. E.S.P. and ETB S.A. E.S.P. entered into an
agreement committing to a joint venture to participate in the auction carried out by the
Ministry of Information Technologies and Telecommunications to grant permits for the use of
the radio spectrum.
The purpose of the Joint Venture is: (a) participate together in the Auction, take the bid bonds
required and apply for the award of a permit to use the radio spectrum as defined in
Resolution 449 / 2013, committing to accept the values offered in the Auction; (b) if they are
awarded one or more permits based on the Auction, fulfill each and every one of the
obligations contained in Resolution 449; and (c) provide telecommunications networks or
- 11 -
services in the national territory. The Parties to the JV are responsible to fulfill 50% of the
obligations per each party.
In 2013, most of the funds invested were used for the acquisition and subsequent award of the
LTE (Long Term Evolution - 3G Evolving Architecture) spectrum on the open block AWS
(Advanced Wireless Services) band. ETB had one year to fulfill the obligation incurred with
the Ministry of Information Technologies and Telecommunications to come up with an LTE
bid for the market as of October 2013, on which date the resolution allocating the spectrum
was made final. On October 7, 2014, ETB launched the mobile 4G service on the market. The
duration of the permit will be for ten years. The Ministry established the first payment for
COP 151,828,735 between ETB and TIGO within 30 days of the date on which the
Resolution was executed, and the rest will be paid on the date when the spectrum segments
are released for use. As at December 31, 2014, ETB has paid COP 97,429,003 distributed as
follows: COP 21,514,636 in 2014 to release the occupied spectrum segments and COP
75,914,367 in 2013 corresponding to 50% of the first payment established by the Ministry
(Note12).
c. N-Play Project – This is one of the Company's strategic programs, whose mission is to
improve the Company's competitiveness by implementing a triple-play high-speed
broadband, TV and IP Voice offering. The program includes the development of the offering
and human resource plans, as well as the implementation of the technologies necessary to
support the triple-play services.
In 2014 and 2013, the resources invested have been used for the deployment of fiber optic,
the implementation of the GPON (Gigabit Passive Optical Network) and IPTV platform, the
support systems for the business and the operation.
d. Sale of Colombia Móvil Shares – In November 2013, the Company executed an agreement to
sell its holdings in Colombia Móvil to UNE EPM Telecomunicaciones S.A. The sale
agreement included 10,799,999 ordinary shares at USD 22.22 per share, for a total of USD
239,999,977.77. The transaction was conditional upon the merger of UNE EPM
Telecomunicaciones S.A. and Millicom Spain Cable S.L., upon receiving the respective
approvals in 2014 from the Superintendence of Industry and Commerce in April, from the
National Television Authority in June and the Superintendence of Companies in August; the
two Companies merged and therefore, the purchase and sale agreement was closed, in
accordance with closing record dated August 23, 2014, generating non-operating income of
COP 345,646,504 (Notes 6 and 27).
e. Purchase of Skynet de Colombia S.A. E.S.P. – On September 24, 2013, based on Minutes No.
258, the Board of Directors authorized the acquisition of 75% of the subscribed and paid
shares of the Internet access and satellite transmission company, Skynet.
On October 30, 2013, ETB signed a purchase and sale agreement for 375,000 shares,
equivalent to 75% of the subscribed and paid shares of SkyNet de Colombia S.A. E.S.P. in
circulation for COP 30,000 million. At October 2013, it was subject to the condition
precedent of reporting the consolidation to the Superintendence of Industry and Commerce.
- 12 -
Once compliance with the condition was verified in January 2014, the transaction was fully
executed by paying for and endorsing the shares and listing ETB's shares in the shareholders
register.
The purpose of this acquisition is to boost programs important to the Corporate Strategy,
supporting business and government clients that are present and require connectivity in
remote regions of Colombia, where Fiber Optics is not an option. This would provide them
with new services in the future, such as Satellite Television (See Note 12).
3.
MAIN ACCOUNTING POLICIES AND PRACTICES
The financial statements were prepared in accordance with Colombia's generally accepted
accounting principles for public-sector and public utility companies, regulated by Resolution
No. 222 / July 5, 2006 and Resolution No. 356 / September 5, 2007 of Colombia's General
Accounting Office. Certain accounting principles applied by the Company, which are in
accordance with Colombia's generally accepted accounting principles, may not be in
accordance with generally accepted accounting principles in other countries.
The following is a description of the principal accounting policies adopted by the Company:
a. Change in Estimates – Accounting Period - The Company made a change in the pension
transfer amortization period as established by Decree 4565 / December 7, 2010, which
allows Companies to defer the amount to be amortized up to 2029 in line with current
legislation. As a result, the Company will amortize the pension liability transfer using the
straight line method up to the year 2015. The effect of the change resulted in recording a
higher amortization expense in 2014 for COP 166,437,249 as indicated in Note 11 of Other
Assets.
b.
Monetary Unit - In accordance with the legal regulations, the monetary unit used by the
Company for the Balance Sheet and the Statement of Income accounts is the Colombian
Peso.
c.
Accounting Period - The Company Bylaws has defined the closing of its accounting and the
preparation and dissemination of the general Financial Statements once per year on
December 31.
d.
Materiality Criterion – Economic events are recognized and presented in accordance with
their relative importance. In the preparation of the financial statements, materiality is
determined in relation to the total current assets and liabilities; the total assets and
liabilities; working capital or the statement of income for the period, as applicable. As a
general rule, the criterion of 5% of the total assets and 5% of the revenue was followed.
e.
Adjustments for Inflation – Based on Resolutions 351 and 364 / 2001, Colombia's General
Accounting Office ordered companies to eliminate adjustments for inflation. Up to
December 31, 2001, with the exception of inventory non-monetary assets and liabilities and
equity accounts, except for revaluation reserve, were adjusted to account for the effects of
inflation using the adjustment percentages determined based on the variation of the general
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consumer price index. The value of the inflation adjustments recorded up to December 31,
2001 is included in the book value for all purposes.
Debit and credit balances for deferred monetary adjustments recorded up to December 31,
2001 are amortized by debiting or crediting the statement of income for the period, based
on the period of depreciation or amortization for the related asset.
f.
Conversion of transactions and balances in foreign currency - Foreign currency transactions
are recorded at the applicable exchange rates in force at the time of the transaction. At the
end of each financial year, accounts receivable or payable in foreign currencies are updated at
the official exchange rate certified by the Colombian Financial Superintendence: COP
2,392.46 and COP 1,926.83 equals USD 1 as at December 31, 2014 and 2013, respectively.
The resulting exchange rate gain or loss is included in the statement of income for the period.
g.
Cash and cash equivalents – The statement of cash flow has been prepared in accordance
with the indirect method. For purposes of presentation in the statement of cash flow, the
Company classifies investments with current maturity under cash equivalents.
h.
Investments - The Company classifies and records its short-term and long-term investments
as follows:
i.

Short-term investments: Investments with current maturities of cash surplus made in
order to obtain fixed income, are reflected in cash as cash equivalents.

Equity investments by the cost method - These investments are recorded at the cost of
investment and they are valued at absolute value; if this value is less, a provision is
charged to the statement of income, and if it is greater a valuation is credited to the
revaluation reserve.

Investments in subsidiaries using the equity method - Investments in subsidiaries, to
which the economic entity has the power to transfer their profits or surplus, are
recorded using the equity method.
Allowance for accounts receivable - The allowance for bad debt is revised and updated based
on the aging group in accounts receivable and their characteristics.
Portfolio
Individuals,
Directories and
other
Special and Data
Governance
Risk
High
1-30
1.8%
31-60
8.1%
61-90
31.2%
91-120 121-150
66.8%
-
151-180
More
than 181
-
-
Medium
0.2%
2.7%
19.2%
59.2%
-
-
-
Low
0.0%
2.0%
14.4%
54.3%
-
-
-
High
14.6%
39.7%
53.4%
70.1%
81.0%
100.0%
100.0%
Medium
12.1%
20.8%
30.7%
39.0%
40.4%
100.0%
100.0%
Low
3.2%
13.9%
18.0%
27.2%
39.3%
100.0%
100.0%
High
3.6%
25.8%
54.7%
91.7%
92.0%
100.0%
100.0%
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Medium
3.2%
8.2%
35.1%
82.6%
91.0%
100.0%
100.0%
Low
2.7%
2.8%
18.7%
46.2%
59.4%
100.0%
100.0%
-
-
70.0%
100.0%
100.0%
50.0%
50.0%
50.0%
100.0%
Past due
accounts (*)
-
-
Non-commercial
(**)
-
-
5.0%
(*) The commercial loan portfolio with current maturities greater than 120 days.
(**) It is also analyzed individually to determine the sufficiency of the allowance.
The commercial loan portfolio of national and international operators is analyzed individually
and 100% of the net balance of accounts receivable and payable for the operator at risk of bad
payment are allocated as an allowance.
The commercial loan portfolio of LSPs (local service providers) is analyzed individually and
an allowance is allocated on a monthly basis by applying a percentage established based on
billing and collection over the last twelve months.
There is no allowance for the employee loans portfolio because it is protected by the
mortgage in favor of ETB and deducted in installments from payroll. The portfolio for
collecting medical services fees from employees has a 100% coverage allowance.
j.
Subsidies and contributions - As established by Law 1341 / July 30, 2009, the Company
records the subsidies granted to socio-economic levels 1 and 2 in an account receivable
from the Ministry of Information Technologies and Telecommunications during the 5-year
validity period. According to the regulations issued, for the purposes of recognition by the
Ministry of Information Technologies and Telecommunications (through the ICT Fund),
the Company must use the periodic consideration to be paid for the basic public switched
national telephone services, equivalent to 2.2% of the gross income, to subsidize users from
socio-economic levels 1 and 2. If that consideration is not sufficient, the Ministry (ICT
Fund) will cover the difference.
k.
Inventory – Inventory consists of mobile terminals, TV decoders, items subject to return
and consumables such as transmission equipment, tools, cables and spare parts. Equipment
is recorded at cost, and at the end of the period, the book value is reduced to market value if
it is less. The cost is determined based on the average cost method.
l.
Property, plant and equipment - These items are recorded at cost adjusted for inflation up to
December 31, 2001. They are depreciated using the straight-line method, based on the
expected useful life of the assets established by Colombia's General Accounting Office, as
follows:
Assets
Useful life
Constructions and buildings
50 years
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Assets
Useful life
Plants and ducts:
 Local telephone service
 Internet and data service
 Long distance
 Mobile Phone
Networks, lines and cables:
 Local telephone service
 Internet and data service
 Long distance
 Conduits
Machinery and equipment
Furniture and appliances
Office equipment
Communication equipment
Transportation, pulling and lifting
equipment
Computer equipment
20 years
7 years
10 years
10 years
20 years
7 years
10 years
25 years
10 years
10 years
10 years
10 years
10 years
5 years
For accounting purposes, the Company does not consider any residual value for its assets,
because it considers that such value it would be relatively immaterial. They are therefore
fully depreciated.
Repairs and maintenance of assets are charged to the statement of income, since
improvements and additions are added to the assets' cost.
Retirement, sale and transfer of property, plant and equipment are recorded by
eliminating the cost and accumulated depreciation of said assets and any gain or loss is
charged to the statement of income.
m. Other assets
Prepaid Expenses – Costs and expenses disbursed in advance for the provision of services
are recorded and amortized during the period in which they are received, which shall not
exceed one year. The costs and expenses corresponding to insurance policies are amortized
in accordance with the effect of the policies.
Deferred Assets - Deferred assets consist mainly of deferred income tax debit, charges for
updating information systems and processes, assets held by third parties, works and
improvements on third party property, assets acquired by leasing. Deferred charges are
amortized using the straight-line method, in periods ranging from one to five years depending
on the duration of each project. In addition, it corresponds to the asset derived from the value
that was pending amortization of the pension liability at the time of the transfer and the
- 16 -
premium paid to the Insurance Company as established in the contract for the full transfer of
the pension liability. Up to 2013, this asset had a 16-year amortization period based on the
straight-line method. As of 2014, they will be amortized in a 2-year period, as explained in
detail in Note 3 (a) - Change in Estimates.
Other long-term assets – Up to August 2013, these are the fiduciary orders constituted to
fund the pension liability. The returns generated by these investments are recorded as finance
income or expenses.
n.
Intangibles – These are mainly the costs incurred in rights of use and easement, which are
amortized in the agreed periods of 2 to 15 years. In addition, the licenses and software
acquired in the process of updating the operating platform and computer information system
are recorded as intangibles and amortized using the straight-line method over a period from 1
to 10 years. In addition, they include the cost of the operating license for the long distance
service, which is fully amortized, and the cost of the license to use the radio spectrum where
the 4G networks will operate, which will be amortized over a 10-year period.
o.
Goodwill – Originated by acquisitions made for a price higher than the book value of the
subsidiaries Skynet de Colombia S.A. E.S.P. and Ingelcom, which is being amortized over
a 5-year period using the straight-line method, during which time the additional benefits of
said investment are expected to be generated.
p.
Valuations (Devaluations) - These are:
(a) differences between Property Plant and Equipment net book value and the expert
appraisal; when the latter is greater, the difference is recorded in separate accounts in assets
as valuations; when it is less, a devaluation is generated and recorded directly in the
statement of income as an expense for that period.
(b) Investments corresponding to the difference between the market or absolute value and
the cost adjusted for inflation. These valuations are recorded in separate accounts in assets
and as a revaluation reserve in the statement of changes in equity. They cannot be
distributed. Devaluations are recorded directly in the statement of income as an expense for
the period.
q.
Provision for Income Tax and other Complementary Taxes – The Company determines the
provision for income tax and related taxes based on profits and the income tax for equality
(CREE) based on greater of the taxable income and the presumed minimum income,
estimated at the rates specified by tax law. In addition, the effect of temporary differences
between book and tax treatment of certain items is recorded as deferred income tax, provided
there is a reasonable expectation that such differences will be reversed. In 2013, the
Company did not record any deferred taxes on the new CREE tax because, since it was a new
tax, there were no temporary differences for the periods prior to the year 2013. This is in
accordance with technical and legal analyses sustained by the interpretation developed with
the support of tax experts.
- 17 -
r.
Equity Tax – According to the provisions established by Colombia's generally accepted
accounting principles and the alternatives for recording accounting entries established
therein, the Company opted to record the tax as a deferred asset that is amortized by
debiting the revaluated equity account on a yearly basis for four years for the value of the
payments due in the respective period.
s.
Labor Obligations – Mandatory and voluntary liabilities with employees, by virtue of
applicable labor agreements, interest on severance pay, seniority bonuses, paid vacations
and social security payments calculated based on the salary earned.
t.
Retirement Pensions – Up to July 2013, retirement pensions were recorded on a monthly
basis and adjusted at the end of each fiscal year based on legal provisions and the labor law
in force, because the Company switched over its pension liability as described in Note 2
and Note 19.
For employees covered by the new social security system (Law 100 / 1993), the Company
covers its pension liabilities through payments to Colpensiones (Colombian Pension
Administrator (previously the Social Security Institute - ISS, for the Spanish original)
and/or private pension funds in the terms provided by said law. The liability for retirement
pensions represents the present value of all future monthly payments to be made by the
Company to the employees who met or will meet certain legal and/or conventional
requirements as far as age, time of service and others, determined by the Company's current
actuarial studies. Pension payments are charged directly to the statement of income.
The provisions of Decree 4565 / December 7, 2010 are applied to calculate
amortization.
Pension Funding – Up to August 2013, the Company created fiduciary orders to fund
the pension liability. The returns generated by these investments are recorded in nonoperating income.
In September 2013, as a result of the pension liability transfer, all of the resources held
in fiduciary orders were transferred to Positiva Compañía de Seguros S.A.
Fringe Benefits of Retirement Pensions – Pursuant to the collective labor agreement, the
Company considers certain fringe benefits for the relatives of active employees. Based
on Law 4 / 1976, some of these benefits were extended to the relatives of retirees,
including medical services, education for underage children, subject to proof of
financial dependence, and recreation.
As at December 31, 2014 and 2013, the Company recorded the liability in accordance
with the actuarial calculation of the benefit of health care payments for retirees
prepared by an independent actuary. Therefore, a provision is being allocated for the
liability that, at present value, covers the obligation estimated by this benefit projected
to the closing date of the fiscal year, recorded in the statement of income. The
healthcare benefit corresponding to the medical services to which the relatives of
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retirees and the Company's active staff are entitled, and any other benefits, are recorded
as the respective disbursements or the respective invoices are charged to the statement
of income for the period.
u.
Contingencies - Certain contingent conditions may exist the date upon which the financial
statements are issued. These conditions may result in a loss for the Company, even though
they will only be resolved in the future when one or more events occur or may occur. These
contingencies are rated by Management in accordance with their probability of occurrence
based on examination by internal and external legal advisors. If the assessment of the
contingency indicates that it is likely that a material loss will occur and the amount of the
liability can be estimated, a provision is recorded in the financial statements.
v.
Reporting revenue, costs and expenses – Revenue from providing telephone services, shares
in contracts with operators and services other than telephone are recorded monthly in
accordance with the trade agreements in force. Services provided but not billed are valued in
accordance with the trade plans or included as part of accounts receivable. Costs and
expenses are recorded on an accrual accounting system.
w. Earnings per share – Earnings per share are calculated based on the subscribed and paid
shares outstanding at the end of the fiscal year.
x.
Memorandum accounts – Include contingent rights and responsibilities and differences
between tax and accounting figures.
y.
Use of estimates – The preparation of financial statements in accordance with the generally
accepted accounting principles requires Management to make certain estimates and
assumptions that affect the amounts of assets, liabilities, income and expenses reported
during the period. Even when the final effect thereof may vary, management considers that
the estimates and assumptions used were appropriate under the circumstances.
z.
Reclassification - Certain figures included in the financial statements as at December 31,
2013 were reclassified for comparative purposes, which are not significant.
Convergence to International Financial Reporting Standards – In accordance with the
provisions of Law 1314 / 2009, Regulatory Decree 2784 / December 2012 and Decree 3024 /
2013, the Company belongs to Group 1 of those preparing financial reports and therefore,
submitted the opening statement of financial position to the Colombian Financial
Superintendence as at January 1, 2014 and July 31, 2014. According to IFRS 1, there is the
possibility that the preliminary opening statement of financial position may require adjustments
before issuing the final opening statement of financial position. Under IFRS, only a full set of
the financial statements consisting of a statement of financial position, the statement of income,
the statement of changes in equity and the statement of cash flow, along with the comparative
financial information and the explanatory notes, can provide a reasonable presentation of the
Company's financial position, the results of operations and cash flows. The first financial
statements according to the International Financial Reporting Standards will be issued on
December 31, 2015.
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4. ASSETS AND LIABILITIES IN FOREIGN CURRENCY
2014
US
Dollars
Assets
Liabilities
Net asset position
2013
Pesos
$000
US
Dollars
56,006,379
(37,757,568)
COP
133,993,021
(90,333,471)
18,248,811
COP
43,659,550
Pesos
$000
119,930,128 COP 231,084,968
(60,506,703)
(116,586,131)
59,423,425 COP
114,498,837
5. CASH
2014
On hand
Banks and corporations (1)
Liquidity Management Deposits
Deposits Abroad and Banks in Foreign
Currencies (2)
COP
49,470
630,608,937
12,314,110
2013
COP
63,695
625,066,107
6,675,266
95,436,205
COP
738,408,722
192,016,714
COP
823,821,782
(1) According to reciprocity agreements entered into with collecting banks, the funds from the development
of telephone services are restricted as far as their use for an average time of 18 days following the deposit
thereof.
(2) As at December 31, 2014 and 2013, the amount is USD 39,890,407.81 and USD 99,654,206.22,
respectively. These balances include mainly:
Time Deposit -USD 22,043,264.55 - 52.737.629 (2013-USD 83,427,089.34 - 160.749.819)
Money market - USD 83,964.52 - 200.882 (2013-USD 5,588,368.10 - 10,767,835)
Deposits abroad - USD 17,763,178.74 - 42,497,694 (2013 - USD 10,638,748.78 - 20,499,060).
6. INVESTMENTS
2014
Short-term investments - certificates of deposit
CD (1)
COP
Long-term investments (2) (3)
Less - Allowance
384,360,208
2013
COP
48,506,731
(59,840)
COP
(1) Short-term investments are made up of:
Entity
- 20 -
48,446,891
212,951,046
147,328,128
(37,121,845)
COP
110,206,283
CD – Banco Colpatria
CD – Banco Sudameris
CD – Helm Bank
CD – Banco Corpbanca
CD – Bancolombia
CD - Banco Popular
CD – Findeter
CD – Banco Citibank
CD – Ministry of Finance
CD – Banco BBVA
CD – Banco Pichincha
CD – Banco de Bogotá
CD – Banco AV Villas
CD – Banco Davivienda
CD – Banco de Occidente
COP
5,000,000
89,656,616
COP 90,546,991
43,099,810
21,008,280
16,080,400
13,063,455
-
67,500,000
20,500,000
20,000,000
2,000,000
3,000,000
5,203,592
5,500,000
12,000,000
125,500,000
-
8,134,700
7,000,000
4,527,470
3,507,700
3,000,000
2,982,240
-
20,500,000
8,000,000
COP 384,360,208
COP
212,951,046
(2) In November 2013, the Company executed an agreement to sell its holdings in Colombia Móvil to UNE EPM
Telecomunicaciones S.A. The sale agreement included 10,799,999 ordinary shares at USD 22,22 per share,
for a total of USD 239,999,977.77. The transaction was conditional upon the merger of UNE EPM
Telecomunicaciones S.A. and Millicom Spain Cable S.L., upon receiving the respective approvals in 2014
from the Superintendence of Industry and Commerce in April, from the National Television Authority in June
and the Superintendence of Companies in August; the two Companies merged and therefore, the purchase and
sale agreement was closed, in accordance with Closing Protocol dated August 23, 2014, generating a nonoperating profit of COP 345,646,504 (Note 2 (d) and Note 27).
(3) Below are the details of the long-term investments as at December 31, 2014:
Economic activity
Share
Percentage
Type of
Share
No. Shares
Held
Absolute
Value
Cost
Book
Value
Valuation (See
Note 13)
Allowance
In uncontrolled companies:
Contact Center
Américas S.A.
Empresa de
Energía de Bogotá
Banco Popular SA
Sistema Satelital
Andino
Acerías Paz del
Río S.A.
Provision of Services
Public
Public
Financial
39.99%
Ordinary
63,994
COP
3,999,491
0.04%
0.11%
Ordinary
Ordinary
4,258,184
8,772,703
1,434,343
1,466,881
Telecommunications
0.69%
Ordinary
24,905
59,584
Basic Industry
0.00002%
Ordinary
3,289
In controlled companies:
Colvatel S.A.
E.S.P (1)
Telecommunications
Skynet de
Colombia S.A.
E.S.P (2)
Telecommunications
COP
COP
22,383,363
3,999,491
COP
18,383,872
-
7,086,875
2,977,280
1,434,343
1,466,881
5,652,532
1,510,399
-
-
-
-
300
44
44
6,960,599
32,447,562
6,900,759
25,546,803
-
(59,584)
(256)
(59,840)
88.16%
Ordinary
8,088,100,440
27,796,596
28,578,130
27,796,596
781,534
-
75%
Ordinary
2,962,499
13,749,536
13,749,536
13,749,536
-
-
41,546,132
42,327,666
41,546,132
781,534
-
COP
48,506,731
COP
74,775,228
COP
48,446,891
COP 26,328,337
D
- 21 -
COP 59,840
Below are the details of the long-term investments as at December 31, 2013:
Economic activity
Percentage
Percentage
Type of
Share
No. Shares
Held
Absolute
Value
Cost
Book
Value
Valuation (See
Note 13)
Allowance
In uncontrolled companies:
Colombia Móvil
S.A E.S.P.
Contact Center
Américas S.A.
Empresa de
Energía de Bogotá
Banco Popular SA
Sistema Satelital
Andino
Acerías Paz del
Río S.A.
PCS Telephone
services
COP
COP
10,799,999
116,322,253
79,248,664
COP
79,248,664
COP
(37,073,589)
$-
24.99%
Ordinary
Provision of Services
Public
Utilities
Financial
39.99%
Ordinary
63,994
3,999,491
19,145,579
3,999,491
15,146,088
-
0.04%
0.11%
Ordinary
Ordinary
4,258,184
8,772,703
1,434,343
1,466,881
6,479,791
2,679,359
1,434,343
1,466,881
5,045,448
1,212,478
-
Telecommunications
0.69%
Ordinary
24,905
47,987
Basic Industry
0.00002%
Ordinary
3,289
300
31
31
123,271,255
107,553,424
86,149,410
21,404,014
24,056,873
24,838,407
24,056,873
781,534
COP
147,328,128
COP
132,391,831
COP
110,206,283
COP 22,185,548
In controlled companies:
Colvatel S.A.
E.S.P (2)
Telecommunications
88.16%
Ordinary
8,088,100,440
D
-
-
-
(47,987)
-
(269)
(37,121,845)
COP
(37,121,845)
The investments held by the Company as at December 31, 2014 have no restrictions or encumbrances.
(1)
ETB, as a majority shareholder of Colvatel S.A. E.S.P., with a share of 88.16% has appraised this investment
using the equity method. According to the audited financial statements of Colvatel S.A. E.S.P. As at December
31, 2014 and 2013, the balances are as follows:
2014
Assets
Liabilities
Equity (a)
(a)
The composition of equity is as follows:
Share capital
Legal reserve
Investment reserve
Net profit for the year
Revaluation reserve
2013
COP
56,499,801
24,083,478
32,416,323
COP
COP
9,174,374
6,334,310
8,205,580
8,699,960
2,099
COP
COP
32,416,323
COP
45,749,203
17,574,868
28,174,335
9,174,374
6,334,310
8,205,580
4,458,276
1,795
28,174,335
As at December 31, 2014, revenue was recorded using the equity method for COP 7,669,858 (2013 - COP
3,930,402).
(2)
ETB, as a majority shareholder of Skynet S.A., with a share of 75% has appraised this investment using the
equity method (See Note 2). According to the audited financial statements of Skynet S.A., as at December 31,
2014 and 2013, the balances were as follows:
- 22 -
Assets
Liabilities
Equity (a)
(a)
The composition of equity is as follows:
Share capital
Legal reserve
Properties revaluation reserve
Previous year results
Net profit for the year
COP
25,195,713
6,862,995
18,332,718
COP 16,817,637
6,547,744
10,269,893
COP
9,753,990
515,903
4,837,721
3,225,104
COP
3,950,000
250,000
3,410,862
2,659,031
COP
18,332,718
COP
10,269,893
As at December 31, 2014, revenue was recorded using the equity method for COP 2,418,827
7. ACCOUNTS RECEIVABLE, NET
Provision of Services - directories
Telecommunications Services (1)
Interconnection with operators
Subsidies and contributions (2)
Loans to employees
COP
4,310,109
271,922,321
28,359,548
29,510,722
16,506,683
COP
2014
Prepaid taxes
Advances to contractors
Deposits provided
Past due accounts - retired due to non-payment
Pension shares
Other accounts receivable (3)
3,865,903
231,282,641
30,492,352
28,847,665
20,244,960
2013
162,011,786
11,591,945
4,065,568
242,174,283
2,022,462
191,424,901
113,841,129
12,599,940
3,437,075
212,967,982
2,289,612
190,430,243
Less - Allowance for accounts receivable (4)
963,900,328
(316,126,811)
850,299,502
(246,583,814)
Less - current portion
647,773,517
(452,441,258)
603,715,688
(399,292,544)
COP
(1)
195,332,259 COP
204,423,144
The following is the composition of the loan portfolio associated with telecommunications services:
Individuals
LSPs and cell providers
Governance (a)
Prepaid Cards - Public Telephones
- 23 -
COP
160,338,696
8,251,749
103,219,358
112,518
COP
171,478,308
6,333,214
53,450,005
21,114
COP
271,922,321
COP
231,282,641
(a) The variation is mainly due to the loan portfolio generated for COP 41,677,890 with the
Superintendence of Notaries and Records.
(2) The amount corresponding to the case filed by ETB against the Telecommunications Fund on July 14,
2000 due to the damages suffered from funding the deficit between subsidies and contributions in 1998
for COP 21,897,152 (2013 COP 21,897,152) and subsidies payable to ETB pursuant to Law 1341 / 2009
for COP 7,613,570 (2013 - COP 6,950,513).
(3) Other accounts receivable consist of:
Accounts receivable yields
Claims and Compensations (a)
Reimbursement of Pensions ISS
Home loans former employees
Financing interest individuals
Promissory Notes
Investment Yields
Dividends and shares receivable
Leases
Agency agreements
Embargoes
Services
Other accounts receivable
COP
COP
499,597
153,651,186
2,207,689
5,293,246
1,831,389
1,558,010
4,243,230
2,050,296
1,150,536
4,832,875
7,499,117
867,997
5,739,733
$-
191,424,901
COP
155,751,764
2,530,378
5,933,255
2,157,773
1,558,010
1,210,418
8,223,630
7,220,913
867,997
4,976,105
190,430,243
(a) This is mainly the charge ordered by the Council of State through rulings of August 9, 2012 and
September 6, 2012, ordering Comunicación Celular COMCEL S.A. (now "Claro") to return the amounts
previously paid to Comcel in compliance with the ruling of December 15, 2006 as a result of the
contracts signed by the parties on October 13, 1998 for access charges and the use of interconnection for
COP 138,283,653 in capital and COP 14,641,957 for indexing, for a total of COP 152,925,610.
(4)
The allowance for accounts receivable includes:
2014
Provision of services - directories
Telecommunications Services (a)
Interconnection with international operators
Subsidies and contributions
Loans to employees
Past due accounts - retired due to non-payment
Administrative Investigation
Other accounts receivable
2013
COP
2,172,990
69,624,624
16,227,022
3,074,660
1,649,606
212,967,070
138,558
10,272,281
COP
2,871,278
31,335,614
12,434,802
3,074,660
1,740,548
185,546,720
138,558
9,441,634
COP
316,126,811
COP
246,583,814
(a) This includes mainly the provision for the portfolios of LSP COP 8,251,748 (2013 - COP
5,351,121), government portfolio COP 38,507,433 (2013 - COP 8,955,511) and portfolio of
individuals COP 22,865,443 (2013 - COP 17,028,982).
Movements in the allowance account are presented below:
Opening balance
Charges to the statement of income (Note 26)
- 24 -
COP
246,583,814
70,921,182
COP
218,752,669
42,549,357
-
Provision for Ingelcom - merger
Recovery of the allowance (Note 27)
987,792
(15,706,004)
(1,378,185)
Final balance
COP
316,126,811
COP
246,583,814
8. RELATED COMPANIES
Main balances and transactions with related companies - The accounts receivable and payable with
related companies correspond to:
Accounts receivable:
Capital District
Colombia Móvil S.A. E.S.P.
Colvatel SA E.S.P.
Contact Center Américas S.A.
Banco Popular
Empresa de Energía de Bogotá
Skynet de Colombia S.A. E.S.P.
Total accounts receivable
COP
14,026,726 COP
3,616,894
2,040,975
99,761
210,878
32,590
47,692,351
5,742,196
195,791
14,872
350,594
485,023
-
COP
20,027,824
54,480,827
COP
2014
Accounts payable:
Capital District
Colombia Móvil S.A. E.S.P.
Colvatel SA E.S.P.
Contact Center Américas S.A.
Skynet de Colombia S.A. E.S.P.
COP
Accounts payable total
COP
2013
87,795,966 COP
23,475,982
27,617,550
852,678
139,742,176
COP
103,645,401
1,537,661
5,893,014
19,217,030
130,293,106
The following is the effect of transactions with related companies on the statement of income:
Company
Revenue
Colombia Móvil S.A. E.S.P.
Colombia Móvil S.A. E.S.P.
Colombia Móvil S.A. E.S.P.
Colombia Móvil S.A. E.S.P.
Colvatel S.A.
Colvatel S.A.
Colvatel S.A.
Colvatel S.A.
Transaction type
Interest
Telecommunications
Services
Leases
Other extraordinary
revenue
Telecommunications
Services
Fees and commissions
Other extraordinary
revenue
Interests and returns
- 25 -
$-
COP
10,878,613
-
13,233,867
410,780
-
1,506,626
220,574
36,343
634,554
-
163,908
68,800
71,468
10,960
Company
Contact Center Américas S.A.
Contact Center Américas S.A.
Contact Center Américas S.A.
Contact Center Américas S.A.
Contact Center Américas S.A.
Banco Popular
Empresa de Energía de Bogotá
S.A. E.S.P.
Empresa de Energía de Bogotá
S.A. E.S.P.
Skynet de Colombia S.A.
E.S.P.
Capital District
Capital District
Capital District
Transaction type
Telecommunications
Services
Dividends
Leases
Fines and sanctions
Other extraordinary
revenue
Interest
Telecommunications
Services
Dividends
Telecommunications
Services
Telecommunications
Services
Leases
Other revenue
Total Revenue
4,128,381
11,650
928
72,147
2,911,727
45,169
-
2,277,061
515,244
2,508,872
219,260
244,815
273,886
192,904
10,074
-
41,631,249
12,702,048
451,768
COP
62,597,776
70,913,011
10,600,803
COP
2014
114,349,714
2013
Costs and expenses:
Colvatel S.A. E.S.P.
Colvatel S.A. E.S.P.
Colvatel S.A. E.S.P.
Colvatel S.A. E.S.P.
Contact Center Américas S.A.
Skynet de Colombia S.A.
E.S.P.
Colombia Móvil S.A. E.S.P.
Colombia Móvil S.A. E.S.P.
Technical operational
maintenance (point to
multipoint platform)
Commissions, fees and
public telephone
management services.
Infrastructure leasing.
Other Costs
Outsourcing service
Leasing, links and
channels.
Access charges.
PCS Communication
Service.
COP
47,924,358
COP
586,197
78,724
801,896
101,287,834
536,248
87,320
895,548
95,550,940
6,311,629
-
910,377
530,652
-
Total costs and expenses
156,990,638
Net effect on results
28,319,342
COP
94,392,862
126,830,427
COP
12,480,713
In 2014 and 2013, there were no events between Management and Board Members, or between
Management and legal persons, in which the Board Members are in turn legal representatives or
shareholders with a share greater than or equal to 10% of the following types of transactions:
- 26 -
a) Loans without interest or consideration, or services at no charge.
b) Loans involving for the borrower an obligation that does not correspond to the essence or nature of
the mutual agreement.
c) Transactions whose characteristics differ from those carried out with third parties.
9. INVENTORY, NET
Items in stores (1)
Less - Provision for obsolescence
COP
57,753,988
(286,451)
COP
11,341,348
(327,973)
COP
57,467,537
COP
11,013,375
(1) This includes mainly:
(a) Mobile terminals for COP 32,568,770 acquired for sale to the users of the new 4G service offered
by the Company since October 2014. (See Note 2 (b)).
(b) TV decoders for COP 6,165,509 for the IPTV service offered by the Company since January 2014
as part of the N-Play Project (See Note 2 (c)).
Movements in the allowance for inventory are presented below:
2014
2013
Opening balance
Provision - debits to statement of income
Recovery of the allowance
Provision for merger - Ingelcom
COP
327,973
75,045
(116,567)
-
COP
127,212
192,900
7,861
Final balance
COP
286,451
COP
327,973
10. PLANT AND EQUIPMENT PROPERTY, NET
Item
Land
Assets under construction (1)
Movable property in storage
Subtotal non-depreciable assets
Adjusted
historical cost
COP
9,226,683
451,168,153
15,284,786
475,679,622
As at December 31, 2014
Accrued
depreciation
Allowance
$-
-
$-
-
Net
Appraisal
Valuation
(See Note 13)
-
COP 9,226,683
451,168,153
15,284,786
COP 190,391,267
-
COP 181,164,584
-
-
475,679,622
190,391,267
181,164,584
Plants and networks (2)
Furniture and appliances
Buildings
Vehicles
Communication equipment,
computers and other
4,184,433,452
45,801,018
170,267,686
30,139,952
2,982,476,415
27,051,448
43,312,577
26,787,659
3,253,398
184,520
22,772
1,198,703,639
18,565,050
126,955,109
3,329,521
1,466,363,732
18,640,900
198,350,722
8,424,093
264,406,695
75,850
71,395,613
5,094,572
166,587,228
142,822,238
288,421
23,476,569
23,996,973
520,404
Subtotal depreciable assets
4,597,229,336
3,222,450,337
3,749,111
1,371,029,888
1,715,776,420
341,493,134
COP1,846,709,510
COP
1,906,167,687
COP 522,657,718
COP5,072,908,958
COP3,222,450,337
COP3,749,111
Total
- 27 -
Item
Land
Adjusted
historical cost
COP
Constructions in progress
Movable property in storage
9,286,644
307,770,530
11,838,175
Subtotal non-depreciable
assets
328,895,349
Plants and networks
Furniture and appliances
Buildings
Vehicles
Communication equipment,
computers and other
$-
$-
Net
Appraisal
Valuation
(See Note 13)
-
-
COP 9,286,644
307,770,530
11,838,175
COP 181,038,390
-
-
-
328,895,349
181,038,390
171,751,746
COP
171,751,746
-
3,896,704,049
35,404,022
183,829,605
30,258,372
2,698,549,627
25,653,760
44,206,143
25,574,071
2,793,357
138,297
24,294
1,195,361,065
9,611,965
139,623,462
4,660,007
1,422,799,367
9,724,669
211,142,567
9,658,191
227,438,302
112,704
71,519,105
4,998,184
159,774,014
134,501,952
454,473
24,817,589
26,827,246
2,009,657
2,928,485,553
3,410,421
1,374,074,088
1,680,152,040
306,077,952
Subtotal depreciable assets
Total
As at December 31, 2013
Accrued
depreciation
Allowance
COP4,634,865,411
COP2,928,485,553
COP3,410,421
COP1,702,969,437 COP1,861,190,430
COP
477,829,698
(1)
As at December 31, 2014, the increase corresponds to the investment made by the Company in the
execution of the N-Play project with the purpose of implementing a triple-play high-speed broadband, TV and
IP Voice offering on fiber optic (See Note 2 (c)).
(2)
This is the provision for the slow activity of the spare parts that are part of plants and networks.
The cost and expense for total depreciation recorded in the statement of income as at December 31, 2014
was COP 296,595,786 (2013 - COP 296,646,496).
There are no restrictions or encumbrances on property, plant and equipment.
11. OTHER ASSETS
2014
Deferred income tax debit (1)
Studies and projects (2)
Assets held by third parties
Works and improvements on third party property
Assets acquired by leasing (3)
Prepaid Expenses (4)
Material goods and services
Development expenses (5)
Pension liability transfer (6)
Commercial trust – company equity
Equity tax
Miscellaneous
COP
121,235,922
52,859,744
28,651,448
8,095,641
1,928,416
14,082,790
10,735,485
7,776,405
189,527,410
329,840
2,492,937
2013
COP
101,822,633
68,521,583
28,469,693
5,978,999
9,421,137
5,151,795
19,449,474
8,312,195
361,903,557
280,643
28,188,826
617,571
Less - Accumulated amortization
437,716,038
(29,307,335)
638,118,106
(36,509,106)
Less - current portion
408,408,703
(11,838,857)
601,609,000
(2,565,234)
COP
- 28 -
396,569,846
COP
599,043,766
2014
2013
(1) This is the deferred tax resulting from the temporary differences as follows:
Bad debts allowance
Other provisions
Adjustments for Inflation to Fixed Assets
COP
67,332,840
53,903,082
-
COP
25,907,557
75,915,076
COP
121,235,922
COP
101,822,633
This variation is because the deferred tax for the temporary differences up to December 31, 2014 between the
accounting balances and the figures on the tax returns were determined at the rate of 25% for income tax and
9% for the CREE tax. For temporary differences occurring in 2013, the Company estimated the deferred
income tax only at the rate of 25% because it considered the Income Tax for Equality (CREE) was a new tax,
in accordance with the Company's technically and legally grounded interpretation based on examination by its
external advisors. (See Note 3 (q) and Note 17).
(2) These are the charges for the updating of information systems and processes, mainly the leasing of the
electrical infrastructure and satellite network for:
Broadband Project
Somos Project
COP
667,122
14,659,850
COP
2014
10,529,958
24,002,006
2013
11,414,946
4,385,135
4,898,838
16,833,853
IPTV (Internet Protocol Television) Project (Note 2 (c))
LTE - mobile services project (Note 2 (b))
Information Technology Project
Customer Service Project
Other Projects (a)
COP
52,859,744
11,280,920
7,654,543
5,556,708
3,462,879
6,034,569
COP
68,521,583
(a) Consists mainly of the Revchain and Billing, Change Management SAP, FTTH N-Play and
Company Architecture projects.
(3) The assets acquired through finance lease agreements are:
As at December 31, 2014
Details
Obligation
No.
Leasing
Bancoldex
101-11906
Purchase
%
Option to
Purchase
1%
1,928,416
Destination
EAR Maxiplus remote hubs and
license
Value
COP
Nature
Financing
Amortization
1,928,416
COP
1,494,876
Term
Outstanding
Payments
60 months
Outstanding
Balance
COP
433,540
1
Balance
Payable
COP
58,040
As at December 31, 2013
Details
Banco de
Obligation
No.
180-48167
Destination
Installation of Cisco Internet and
- 29 -
Nature
Term
Outstanding
Payments
Financing
60 months
-
As at December 31, 2014
Details
Occidente
Obligation
No.
Leasing
Bancoldex
101-11906
Purchase
%
Option to
Purchase
5%
1%
285,490
35,804
Total
Destination
data equipment at the Banco
Agrario office - IP Telephony
Project
Radio link equipment to be
installed nationwide
Value
COP
COP
Nature
Term
60 months
Financing
COP
9,421,137
COP
14
Outstanding
Balance
Amortization
5,709,793
3,711,344
Outstanding
Payments
5,709,793
2,329,620
$-
8,039,413
COP
Balance
Payable
$-
1,381,724
503,480
1,381,724
COP 503,480
(4) As at December 31, 2014 and 2013, this is made up mainly of prepaid insurance expenses COP
11,381,554 (COP 1,910,238), leases COP 2,586,560 (COP 3,149,393) and subscriptions, memberships
and maintenance COP 114,676 (COP 92,164), respectively.
(5) As at December 31, 2014 and 2013, this includes mainly the premium of the legal stability contract for
COP 10,727,790, which corresponds to 0.5% of the value of the investments made in an unproductive
period and 1% during the operating stage. It is amortized over a 10-year period using the straight line
method. The net balance as at December 2014 is COP 7,768,962 (2013 - COP 8,304,753) (See Note 17).
(6) As described in Note 2 to the financial statements, the Company carried out the total pension liability
transfer in 2013. The agreement signed with the Insurance Company considered the payment of a
premium for 11.66% for the transfer of the risk involved in the pension liability transfer. As at December
31, 2014 and 2013, this asset included:
2014
Premium on the transferred pension liability
Balance to adjust the pension liability to reflect 100% of
the transfer calculation value
COP
71,794,302
2013
COP
109,157,477
Balance paid during the transfer adjustment period
Transfer of new retirees
218,314,954
8,072,484
503,147
COP
189,527,410
143,588,603
COP
361,903,557
As mentioned in paragraph 7 of the Auditor's review, in 2014, sustaining its actions on Decree 4565 /
2010, the Company decided to adjust the amortization period, reducing it from 16 to 2 years, which was
applied on the balance to amortize as at December 31, 2013. This change generated a higher amortization
expense of COP 166,437,249 (See Note 2 (a), Note 3 (a) and Note 19).
The amortization charged to the statement of income as at December 31, 2014 and 2013 for the pension
transfer was COP 189,927,410 and COP 8,502,733.
The total amortization recorded in statement of income as at December 31, 2014 and 2013, without
including the amortization of the pension transfer was COP 56,430,455 and COP 78,531,650,
respectively.
12. INTANGIBLES, NET
Goodwill (1)
COP
- 30 -
26,283,671
COP
3,986,091
Operating license for long distance service
Local and corporate software
Rights of use and easement (2)
Long distance software
Local and corporate licenses (3)
Internet and data software
4G operating license (4)
Internet and data license (3)
Brands
Less - Accumulated amortization
293,248,991
249,211,332
225,154,484
45,028,992
71,845,012
26,605,725
144,723,505
43,475,369
7,808
293,248,991
277,504,576
224,567,702
45,101,792
38,221,606
33,137,156
75,914,367
6,455,204
7,808
1,125,584,889
(716,290,995)
998,145,293
(702,264,769)
COP 409,293,894
COP 295,880,524
(1) This variation is due to the acquisition of 75% of the shares in Skynet de Colombia S.A. E.S.P. for COP
30,000,000 thus generating goodwill for COP 22,297,580, which will be amortized in 5 years (Note 2 (e)).
(2) This includes the rights to use submarine cable and fiber optics for COP 224,281,878 (2013 - COP 223,695,096),
which will be amortized in periods ranging from 2 to 15 years.
(3) This includes:
(a) License to use Oracle for COP 30,432,438, which is a database for the value chain, SRM, IT resource
optimization projects, the service management, N-Play and LTE projects, which are amortized in a 3-year
period, except for N-Play and LTE, which will be amortized in 15 years.
(b) Tibco licenses for COP 4,980,150. This is a connecting bus used to connect all the platforms of the
Revchain system, mainly for customer service, which will be amortized in 15 years.
(c) Other licenses and hardware for COP 10,938,269, which are used for the IT optimization project, to be
amortized in 3 years.
(d) Software Assurance for COP 4.206.789. This is a customer service tool that supports the corporate data
center project, to be amortized in 3 years.
(4) According to Resolution No. 2623 / July 26, 2013 of the Ministry of Information Technologies and
Telecommunications, the permit to use the frequency bands of the radio spectrum was awarded to the Colombia
Móvil (TIGO) - ETB Joint Venture for the operation and provision of mobile ground services. The value of the
radio spectrum allocated is COP 195,749,940.
The duration of the permit will be for ten years. The Ministry established the first payment for COP 151,828,735
between ETB and TIGO within 30 days following the execution date of the Resolution and the rest will be paid the
date on which the spectrum segments are released for use. As at December 31, 2014, ETB has paid COP
97,429,003 distributed as follows: COP 21,514,636 in 2014 to release the spectrum segments and COP 75,914,367
in 2013 corresponding to 50% of the first payment established by the Ministry. (See Note 2 (b)).
In addition, it includes other items associated with the intangible asset, mainly i) the design, supply, installation,
configuration, operation and stabilization of the equipment (hardware and software) of an Internet traffic
inspection platform based on DPI technology COP 2,048,681, ii) COP 5,305,548 for the supply of the Core LTE
solution, iv) specialized consulting for the startup of the LTE mobile business for guidance for the deployment of
the network and the commissioning of the business for COP 29,142,056 and v) evolving maintenance of the Tibco
system for COP 6,159,434.
The total amortization charged to the statement of income as at December 31, 2014 was COP 46,449,772
(2013 - COP 33,528,718).
- 31 -
13. VALUATIONS
2014
Property, plant and telecommunications equipment (1)
Property, plant and equipment other than
telecommunications (1)
COP
Long-term investments (See Note 6)
COP
264,406,695
2013
COP
227,438,302
258,251,023
250,391,396
522,657,718
26,328,337
477,829,698
22,185,548
548,986,055
COP
500,015,246
(1) The main indicators that affected the increase on the value of the property, plant and telecommunications
equipment appraisal as at December 2014 were:
(a) The official exchange rate, which varied 19% compared to the previous year. In 2014, the official
exchange rate of COP 2,392.46 was applied (2013 - COP 1,926.83).
(b) The CPI, which went from 1.94% in 2013 to 3.66% in 2014.
(c) The activations carried out in 2014 with a percentage of approximately 8.5% of the total value of the
assets.
The valuation of fixed assets correspond to:
2014
Land (a)
Buildings (a)
Plants and networks (b)
Furniture and appliances (b)
Communication equipment, computers and other (b)
Vehicles (c)
2013
COP
181,164,584
71,395,613
264,406,695
75,850
520,404
5,094,572
COP
171,751,746
71,519,105
227,438,302
112,704
2,009,657
4,998,184
COP
522,657,718
COP
477,829,698
(a) The land and buildings were appraised in 2013 by Lonja Inmobiliaria, a Colombian Society of Architects
firm. The final report was received on February 28, 2014, on which date the respective adjustment was
recorded.
(b) The plants and networks, communications equipment, computers and furniture and appliances were
appraised in 2014 by Carlos Eduardo Hernandez Ortiz, listed in the National Appraisers Registry Asesorías, Consultorías y Soluciones Integrales S.A.S. (ACSI). In 2013, the Company also recorded an
appraisal for this item, which was carried out by Guillermo Alejandro Ramirez Sanchez, listed in the
National Appraisers Registry - Asesorías, Consultorías y Soluciones Integrales S.A.S. (ACSI).
(c) The vehicles were appraised in December 2013 by Confianza Ingenieros Consultores Ltda. The final
report was submitted in the first quarter of the year, at which time the final appraisal was reported. At
the end of the year 2013, the Company recorded the appraisal with the information of Fasecolda up to
that date.
In 2014, the appraisals had a net increase of COP 48,970,809 (2013 - COP 307,275,078, distributed as
follows:
Long-term investments
COP
- 32 -
4,142,789
COP
6,112,079
Fixed assets
44,828,020
Total activity
COP
48,970,809
301,162,999
COP
307,275,078
14. BONDS AND SECURITIES ISSUED
By means of Resolution No. 4164 / December 28, 2012, the Financial Superintendence authorized the
Company to make the public offering of ordinary bonds. On January 17, 2013, the bond deposits were
made on the international capital market for COP 530,180,000 denominated in Colombian Pesos,
payable in US Dollars over a 10-year period.
The conditions for the bond issue were as follows:
Nominal value
Total amount authorized
Total amount issued
COP 20,000 each
COP 530,180,000
COP 530,180,000 equivalent to USD 299,882,350.28 with
the issue liquidation rate (TRM 1,767.96)
Issue date:
January 17, 2013
Maturity date:
January 17, 2023
Nominal interest rate:
7.00%
Base interest rate
Annually
Date payment of interest
January 17 each year, starting on January 17, 2014
Form of payment
Colombian Pesos payable in US Dollars at the TRM on the
date of payment COP 530,180,000
As at December 31, 2014 and 2013, the interest accrued is COP 37,112,600 and 35,360,061,
respectively.
The funds from the issuance are used to finance investment projects, such as the development and
implementation of the N-Play Triple-play Services program (See Note 2 (c)).
15. PROVIDERS
2014
Domestic Providers
Interconnection with international operators
Foreign Providers
2013
COP
126,098,950
17,747,005
69,828,289
COP
173,013,961
19,309,003
60,834,034
COP
213,674,244
COP
253,156,998
COP
67,660,827
55,384,791
7,246,452
9,961,529
534,622
9,736,394
35,360,061
COP
64,129,093
71,223,364
7,626,216
10,704,105
50,301
9,736,741
36,670,306
16. ACCOUNTS PAYABLE
Commissions, fees and services
Dividends payable (See Note 23)
Payroll creditors
Leases
Insurance
Contributions to the Telecommunications Fund
Interest payable
- 33 -
Third Party Deposits
Other accounts payable
58,644,977
2,796,329
35,783,520
3,692,867
COP
247,325,982
COP
239,616,513
COP
16,296,874
11,755,614
3,006,694
11,367
9,287,535
3,283,239
COP
14,156,674
28,188,826
12,362,019
772,373
4,491
8,835,458
3,719,910
COP
43,641,323
COP
68,039,751
17. TAXES, ENCUMBRANCES, AND FEES
Sales Tax
Equity tax
Withholding tax payable
CREE self-withholdings
Excise Tax
Income tax for equality (CREE)
Industry and Commerce Tax
The tax provisions applicable to the Company stipulate that:
Income tax and CREE tax The rate applicable to income tax for the years 2014 and 2013 is 25%, and the income tax for equality
(CREE) is 9%, respectively.
According to Article 73 of Law 1341 / 2009, companies providing of basic public switched telephone
services, local mobile telephone services in the rural sector and long distance services are not subject to
the presumed minimum income system.
Industry and commerce tax returns for Bogotá D.C. on withholding and sales tax for the years 2012 to
2014 and the tax returns for the years 2012 and 2013 are subject to review by the tax authorities.
Income Tax 2008 – The Company requested compensation for the income tax credit for the 2008 tax year
for COP 14,395,977. However, the DIAN turned down the request and handed down a Resolution by
means of which it imposed a fine for inappropriate compensation. The balance payable determined by
the Tax Authority, along with penalties and interests, amounts to a total of COP 40,521,154
corresponding to the tax credit declared. This case is currently under discussion with the Cundinamarca
Administrative Court (See Note 21).
Below is a summary of the main reconciliation entries for:
a) Difference between accounting income and taxable liquid income 2014
Earnings before income tax
Plus:
COP
- 34 -
227,522,759
2013
COP
119,369,269
Expense for non-deductible provisions
Expenditure from previous years
Reversion excess tax depreciation
over the accounting depreciation
Monetary tax adjustment
Less:
Non-deductible tax expense
Other non-taxable income and categories
Deduction for the acquisition of real productive
assets
Revenue from the sale of Colombia Móvil shares
Revenue from previous years
226,267,089
90,057,154
53,445,604
24,994,398
131,414,552
-
68,814,357
(8,339,795)
13,308,203
50,878,466
63,644,684
14,408,436
240,000,000
371,074,885
-
180,000,000
230,713
25%
25%
(152,295,964)
(58,572,108)
Taxable liquid income
Tax rate
Income Tax
Deferred tax, net
$-
Income tax provision, net
$-
b) Deferred taxes As mentioned in Paragraph 6 of the Auditor's review, as at December 31, 2014 and 2013, the
Company calculated and recorded its deferred income tax based on the temporary differences
between the accounting balances and the figures on its tax returns at the rate of 25%.
The Company did not record the deferred income tax at the rate of 9% corresponding to the CREE
tax, because it assumed the book value of the fixed assets as a balance to be depreciated in the
CREE tax, considering that it is a new tax, so there are no temporary differences between CREE
and accounting values.
The deferred tax debit was recorded making provisions for disbursements expected to be paid in the
future
For the deferred tax credit, the Company applied accelerated depreciation to the income tax (after
signing the legal stability contract). The effect was a lower income tax payment value for the
periods in which it was used, generating a deferred income tax payable.
The Company is currently reversing the effect of the higher depreciation value applied for tax
purposes in previous years.
The activity of deferred income tax is listed in detail below:
2014
Deferred income tax debit (Note 11)
Deferred income tax credit (Note 22)
(19,413,289)
(132,882,675)
- 35 -
2013
39,121,656
(97,693,764)
Deferred tax, net
COP
152,295,964
COP
58,572,108
c) Difference between accounting equity and tax equity -
Accounting equity
Accounts receivable
Shares and contributions
Inventory
Fixed assets
Other assets
Valuations
Liabilities
COP 3,429,484,186 COP 3,097,741,165
269,331,359
210,895,555
23,123,978
411,639,709
286,451
327,973
(311,450,225)
(483,360,733)
(383,939,277)
(423,512,513)
(548,986,055)
(500,015,246)
354,408,531
409,061,446
Tax equity
COP 2,832,258,948
COP 2,722,777,356
Below is a summary of the main reconciliation entries for income tax for equality (CREE):
a) Differences between accounting income and income tax for equality (CREE) 2014
Earnings before income tax
Plus:
Expense for non-deductible provisions
Expenditure from previous years
Less:
Non-deductible tax expense
Other non-taxable income and categories
Excess tax depreciation over the accounting
depreciation
Revenue from the sale of Colombia Móvil shares
Revenue from previous years
OP
Taxable liquid income
Tax rate
Income tax for equality (CREE)
COP
2013
227,522,759OP
119,369,269
226,267,089
90,057,154
53,445,604
24,994,398
18,698,819
50,878,466
63,644,684
14,408,436
371,074,885
-
21,486,682
230,713
103,194,832
9%
98,038,756
9%
9,287,535 COP
8,823,488
b) Differences between accounting equity and tax equity of the income tax for equality (CREE):
Accounting equity
Accounts receivable
COP3,429,484,186
269,331,359
- 36 -
COP 3,097,741,165
210,895,555
Shares and contributions
Inventory
Other assets
Valuations
Liabilities
Tax equity
23,123,978
286,451
(8,940,232)
(548,986,055)
354,408,531
411,639,709
327,973
21,486,682
(500,015,246)
409,061,446
COP3,518,708,218
COP 3,651,137,284
Legal Stability Contract - The Legal Stability Committee, made up of the Ministry of Commerce,
Industry and Tourism, Communications, Finance and the National Planning Department, authorized
signing the legal stability contract for a term of 20 years, which protects the Company's activity in the
event of adverse changes to the tax regime.
Based on the provisions of Article 5 of Law 963 / 2005, which indicates that the investors who sign the
legal stability contracts must pay, in favor of the State, a premium rated as 0.5% of the value of the
investments made in an unproductive period and 1% during the operating stage, the Company paid COP
10,727,790, which was recorded as a deferred charge "development expenses" (Note 11).
The following are the main tax benefits obtained by signing the contract:
Equity tax
 Article 292-1 Tax Code: For the year 2011, Law 1370 / 2009 created the equity tax.

Article 293-1 and 294-1 of the Tax Code. This tax applies when net worth is greater than or equal
to COP 3 billion as at January 1, 2011. The tax is calculated for net worth greater than or equal to
this base. Article 296-1. Tax Code: The rate of the equity tax referred to in Article 292-1 is 4.8% on
net worth greater than or equal to COP 5 billion.
Income - Special Deduction on Real Productive Fixed Assets (AFRP for the Spanish original)
 Article 158-3 Tax Code: Income tax payers may deduct 40% for investments in real productive
fixed assets - Law 1111 / 2006. In the contract validity period, the Company may request the
special deduction of 40% for investments in AFRP (Real Productive Fixed Assets), which
represents a deduction greater than 10% compared to the regulations in force for 2010 and 30% for
the following years, given the elimination of said deduction as of the 2011 tax year by Law 1430 /
2010.
Income - Deduction Payments Abroad
 Article 31 Decree 836 / 1991 - Telecommunication Costs: The limitation discussed in Article 122
of the Tax Code (15% limitation on the taxpayer's net income) will not be applicable on the costs
incurred for the provision of telecommunications services that generate taxable income in
Colombia, even if no taxes are withheld on said costs because there is no legal obligation to do so.
The Company can take 100% of the costs incurred abroad to provide taxable services with income
in Colombia as a deductible in the determination of its net income.
Income tax rate
 Article 240 - Tax Code: The single rate on the taxable income is similar for corporations, limited
liability companies and other entities, in accordance with the relevant regulations, including foreign
companies and other entities of any kind. Said rate was 33% up to 2012.
- 37 -
Equity Tax – In 2010, the DIAN issued a review of the Equity Tax - Law 1370 / 2009 - indicating that it
also applies for taxpayers reporting under the special tax stability arrangement, and, as a result, shall be
recognized in the terms set forth. The Company has executed a formal legal stability agreement since
2009, which includes the Equity Tax. However, in compliance with the DIAN's statement, the Company
determined and recorded the corresponding liability for the 2011 - 2014 period for COP 112,755,302,
the expense for the corresponding tax was paid and recorded, pursuant to the provisions of the
accounting legislation in force. However, based on the analysis of the legal stability contract in force, the
Company has submitted a request for a refund of the payment made to the DIAN of the 8 tax payments
for the total amount and it is currently taking the relevant steps for the recovery thereof.
Tax Reform – The following is a summary of some of the amendments to the Colombian Tax System for
the years 2015 going forward, introduced by Law 1739 / December 23, 2014:
Wealth Tax – The wealth tax was created as of January 1, 2015. This tax is generated by the possession
of wealth (gross equity less current debts) in an amount greater than or equal to COP 1 billion as at
January 1, 2015. The legal obligation is incurred on January 1, 2015, January 1, 2016 and January 1,
2017. The taxable base of the wealth tax is the value of gross equity less current debts held on January 1,
2015, 2016 and 2017. The marginal rate corresponds to:
Taxable Base Ranges
2015
2016
2017
From COP 0 to COP 2,000,000
From COP 2,000,000 to COP 3,000,000
From COP 3,000,000 to COP 5,000,000
From COP 5,000,000 forward
0.20%
0.35%
0.75%
1.15%
0.15%
0.25%
0.50%
1.00%
0.05%
0.10%
0.20%
0.40%
Income tax for equality (CREE) and its surcharge fees – As of the 2016 tax period, and temporarily for
2015, the CREE tax will be 9%.
Tax losses incurred by taxpayers of the CREE tax as of 2015 may be offset in this tax. In addition, the
excess of the minimum base for the CREE tax can also be offset as of 2015 within the following 5 years
fiscally adjusted.
In no case can the CREE tax or its surcharge fees be offset with credits for other taxes liquidated in the
tax returns. Similarly, the tax credits liquidated on the CREE tax returns, and the surcharge cannot be
offset with debts for other taxes, advances, withholding taxes, interest and sanctions.
The CREE surcharge has been created for the 2015, 2016, 2017 and 2018 periods. The event generating
the surcharge applies to taxpayers whose annual CREE tax return indicates a profit greater than or equal
to COP 800 million. The marginal rate applicable to establish the surcharge will be:
Surcharge
Taxable Base - COP 800 million
2015
5%
2016
6%
2017
8%
2018
9%
The surcharge value must be paid 100% in advance. Said value is calculated based on the CREE tax
taxable base used by the when settling said tax in the previous tax year. The CREE tax surcharge
advance payment shall be made in two annual installments as established by the the legal regulations.
- 38 -
Income tax and related taxes – Residence is clarified for tax purposes and the following rates have been
established for the income obtained by foreign companies and entities, that are not attributable to a
branch office or permanent establishment:
Year
2015
2016
2017
2018
39%
40%
42%
43%
The application of the tax credit for taxes paid abroad has been modified, distributing it between the
income tax and the CREE tax in a proportion of 64% and 36%, respectively.
Modifications were established for the tax incentives, consisting of i) Deduction for investments in
research, technological development or innovation, ii) Tax discount on income tax for VAT paid to
acquire capital assets and heavy machinery.
In addition, the exchange rate difference for foreign investments can be handled without affecting taxes
up to the time of disposal of the respective investment.
In addition, the effect of the limitation on deductions for payments in cash has been postponed for the
year 2019 and following.
Other provisions - Again, mechanisms for reconciliation, transaction and special conditions of payment
are established to bring an end to the processes or discussions between taxpayers and the authorities,
related to tax issues, payments of the social security system, customs and foreign exchange.
18. LABOR OBLIGATIONS
2014
Consolidated Severance Pay
Bonuses
Vacations
Other benefits - interest
COP
18,051,275
7,637,730
3,556,793
10,892,692
2013
COP
40,138,490
(26,919,957)
Less - current portion
COP
13,218,533
17,068,417
9,419,047
5,654,154
5,474,842
37,616,460
(25,460,950)
COP
12,155,510
Long term obligations correspond to the severance fees payable to the persons covered by the
arrangement prior to Law 50 / 1990.
19. RETIREMENT PENSIONS AND BENEFITS
Actuarial calculation of pensioners not transferred
COP
2,280,125
$-
The expense recorded in the statement of income for retirement pensions is broken down as follows:
- 39 -
Pension transfer amortization (Note 11 (6))
Amortization of non-transferred retirees
Monthly pension payments (1)
Payments to the ISS for the Company's retirees that have
pension shared with the ISS
Pension Payments
Recovery of actuarial calculation for pensions
Total expense for retirement pensions and related
benefits
COP
189,527,410
2,280,125
882,453
COP
37,111,554
7,327,244
-
COP
237,128,786
8,502,733
81,913,395
10,470,378
7,701,372
(17,538,106)
COP
91,049,772
(1) As at December 31, 2014, this is the monthly payment of pensions for 7 new retirees that have not been
transferred. In 2013, ETB made monthly pension payments up to August 31, 2013 because as of September 1,
2013 the pension transfer took effect (See Note 2 (a)).
20. ESTIMATED LIABILITIES
2014
Provision for contingencies (Note 21)
Contributions to the Communications Fund
Estimated liabilities
Pension payment provision (1)
COP
92,888,051
7,919,571
40,554,376
118,216,846
2013
COP
259,578,844
(73,930,240)
Less - current portion
COP
185,648,604
34,141,916
7,733,910
20,088,605
90,577,781
152,542,212
(53,089,688)
COP
99,452,524
(1) Colpensions shareability - In 2014, the Company obtained an actuarial study of the future pension payments to
be made to Colpensiones in relation to 691 of the Company's retirees to be shared with said entity. The value of
the actuarial study for the pension payments of 2014 was COP 32,028,801 (2013 - COP 37,381,368) and the
actuarial calculation for health care payments for 3,799 transferred retirees amounts to COP 86,188,045 (2013 COP 66,767,913). The balance will be amortized by applying the percentage calculated based on decree 4565 /
2010 applicable to retirement pensions.
21. CONTINGENCIES
As at December 31, 2014 and 2013, the value of claims for lawsuits are as follows:
Claims by type of proceedings:
Administrative
Civil
Labor
COP
- 40 -
454,242,732
8,548,985
327,415,006
COP
299,593,000
8,528,985
330,795,756
Other Contingent Liabilities
Tax Obligations
10,528,099
72,036,167
COP
872,770,989
10,528,099
72,036,167
COP
721,482,007
Based on the assessment of the likelihood of actual loss according to the information provided by the legal
advisors, Company Management has provisioned COP 92,888,051 and CO 34,141,916 as at December 31,
2014 and 2013, respectively, to cover likely losses from these contingencies (See Note 20):
Provision by type of proceedings:
Administrative (1)
Civil
Labor
Other Contingent Liabilities
COP
80,421,867
3,315,652
9,150,201
331
COP
19,497,784
3,195,651
11,448,150
331
COP
92,888,051 COP
34,141,916
As mentioned in paragraph 5 of the Auditor's review, management, with the support of its internal and
external legal advisors, estimates that the result of the lawsuits corresponding to the part that has not been
provisioned as at December 31, 2014 and 2013 for COP 779,882,939 and COP 687,340,091, respectively
(See Note 28) will be ruled in favor of the interests of the Company and will not cause significant liabilities
to be recorded or, if any, they will not affect its financial position significantly:
Lawsuit not provisioned by type of proceedings
Administrative
Civil
Labor
Other Contingent Liabilities
Tax Obligations
COP
373,820,865
5,233,333
318,264,805
10,527,768
72,036,167
COP
280,095,216
5,333,333
319,347,606
10,527,768
72,036,167
COP
779,882,938
COP
687,340,091
(1) Telecom Contingency – As at December 31, 2014, in accordance with the analysis by the internal
legal advisors, the Company has decided to protect itself against the risk of the initial ruling being
revoked or amended and, for the sake of good judgment, changed the value of the contingency to COP
62,380,339. At present, the proceedings are in the Council of State for the resolution of the appeals
filed by the parties.
22. OTHER LIABILITIES
Deferred income tax credit (1)
Collections for third parties
Contributions to the Communications Fund
Income received in advance
Deferred income domestic operators
Liabilities
COP
- 41 -
173,847,376
56,861,605
21,897,151
57,449,100
3,314,902
1,781,242
COP
306,730,051
58,845,127
21,897,151
80,436,275
3,279,777
1,682,174
Pension shares
Prepaid cards
Other deferred income
Less - current portion
COP
2,037,185
606,471
4,122,281
2,282,749
42,680
5,011,988
321,917,313
(122,609,213)
480,207,972
(147,516,522)
199,308,100
COP
332,691,450
(1) This is the deferred tax resulting from the temporary differences as follows:
Tax depreciation over accounting depreciation
Provision for retirement pensions
Amortization of intangibles
Pension transfer amortization
COP
77,862,556
COP
165,935,645
57,891,323
51,840,773
31,062,310
COP
306,730,051
52,969,282
43,015,538
COP
173,847,376
The main variation corresponds to the fact that as at December 31, 2014, the Company reimbursed the DIAN for
the excess of the tax depreciation over the accounting depreciation in the amount of COP 88,073,089 (See Note 3
(q) and Note 17).
23. SHAREHOLDER EQUITY
Share Capital - As at December 31, 2014 and 2013, the authorized capital amounts to COP 2,001,776
corresponding to 3,693,276,163 common shares with a nominal value of COP 0.5420054199290271 per
share. The subscribed and paid-in capital is COP 1,924,419 represented by 3,550,553,412 shares.
Number
of Shares
Shareholders
Capital District
Universidad Distrital Francisco José de Caldas
Municipality of Villavicencio
Meta Governor's Office
Empresa de Acueducto y Alcantarillado de Bogotá
S.A. E.S.P.
Severance and Pension Benefit Fund
Instituto de Desarrollo Urbano de Bogotá
Lotería de Bogotá
Total public common shares
Private capital (common shares outstanding)
Total shares outstanding
- 42 -
Share (%)
3,074,421,943
62,743,304
757,660
615,312
86.58994%
1.76714%
0.02134%
0.01733%
1,373
0.00004%
1,373
1,373
1,373
0.00004%
0.00004%
0.00004%
3,138,543,711
88.39591%
412,009,701
11.60409%
3,550,553,412
100.00000%
Dividends declared - At the General Meeting of Shareholders held on March 26, 2014 (according to
Minutes No. 37), dividends were declared for COP 61,708,618 at the rate of COP 17.38 for each of the
shares outstanding, payable on June 27, 2014 for minority shareholders and March 13, 2015 for majority
shareholders. At the General Meeting of Shareholders held on March 19, 2013 (according to Minutes
No. 36) dividends were declared for COP 80,000,000 at the rate of COP 22.53 per share in circulation
The distribution and allocation of profits was as follows:
2014
Increase reserve excess depreciation
Increase reserve future fiscal years
Distribution of dividends
2013
COP
7,700,000
99,709,271
61,708,618
COP
78,909,508
103,920,664
80,000,000
COP
169,117,889
COP
262,830,172
Movements for dividends declared and payable follows:
2013
2014
Opening balance
Plus - Dividends declared
Less - Dividends paid
COP
71,223,364
61,708,618
(77,547,191)
COP
1,961,239
80,000,000
(10,737,875)
Dividends payable (Note 16)
COP
55,384,791
COP
71,223,364
Share Premium - The balance is comprised of the difference between the nominal value of each share
and its placement price and the value of the premium for the merger with ETELL S.A. E.S.P. of COP
410,276 corresponding to the difference between the nominal value and the value paid for the share in
order to maintain the nominal value of the absorbing company. The value of this account cannot be
distributed as dividends.
Legal Reserve - In accordance with Colombian Law, 10% of the net profit of each fiscal year must be
allocated as a legal reserve until the balance of the reserve is equivalent to at least 50% of the subscribed
capital. The mandatory legal reserve cannot be distributed prior to the Company's liquidation, but it can be
used to absorb net annual losses.
Excess depreciation reserve - According to the tax regulations in force, in order to implement the
deduction of accelerated depreciation, the Company must allocate from its profit 70% of the difference
between the higher value of tax depreciation over accounting depreciation in order to comply with the
provisions of Article 130 of the Tax Code. In subsequent periods, when the tax depreciation is less than
the accounting depreciation, 70% of the difference can be released from the tax reserve as untaxed
income.
Reserve for the restoring, expanding and replacing systems - This reserve was established with the aim
of benefiting from the tax exemption for residential public utility companies, according to Article 211 of
the Tax Code.
- 43 -
Reserve for future fiscal years - Created by decision of the General Meeting of Shareholders. There are
no restrictions on this reserve and it is at the disposal of the Meeting of Shareholders.
Reserve to repurchase shares This reserve was created by decision of the General Meeting of
Shareholders held in 2003. The reserve was constituted in order to repurchase shares from the Company's
minority shareholders, provided they met certain conditions set forth in the majority shareholder
agreement.
Equity valuation - Equity valuation cannot be distributed as profit, but it can be capitalized.
24. OPERATING INCOME
2014
Basic charge
Variable local and Internet charge
Variable long distance charge
Access charges
COP
Telematic and value-added service
Fixed charge
Mobile voice and data service
Connection charge
Public telephones
Reconnection and reinstatement
Communication service
Sundries (1)
420,850,999
108,759,269
57,424,220
58,689,352
2014
2013
COP
473,928,241
127,638,324
64,665,542
58,625,742
2013
175,192,406
409,071,820
879,188
1,365,322
2,261,221
4,836,470
124,987,495
118,410,330
416,299,404
1,014,010
76,077
2,480,219
98,721,606
COP 1,364,317,762
COP 1,361,859,495
COP
65,880,475
16,470,057
3,216,332
1,896,594
788,740
890,454
35,863,703
(18,860)
COP
46,656,030
15,665,305
3,930,757
2,213,069
1,207,798
112,500
1,570,102
27,485,081
(119,036)
COP
124,987,495
COP
98,721,606
(1) Miscellaneous revenue is made up of:
Additional telecommunications services
Traffic lights and others
Billing implementation services and operators
Supplementary services
Special services
Agreements and others
Links
Sale of commodities (a)
Discount on sales
(a) As at December 31, 2014, they are: a) sale of mobile devices and SIM cards for COP 5,264,435 and b)
resale of computers, modems, structured cabling and other for COP 30,599,268.
25. COST OF SALES
Personnel
COP
- 44 -
96,524,022
COP
122,662,348
Overhead
Depreciation
Leases
Amortizations
Access charges
Contributions
Maintenance, repairs and materials
Insurance
Taxes
Fees and consulting
Public utilities
Channels and content
Advertising
Commodities
Orders and contracts for other services (1)
1,625,318
288,010,337
101,286,304
47,150,458
30,223,857
27,617,718
125,224,081
1,603,587
15,751,979
22,413,861
20,862,788
4,329,898
28,174,589
3,319,557
125,717,280
COP
939,835,634
2,745,430
287,407,865
96,795,867
76,987,000
33,521,184
28,696,968
109,891,967
8,879,403
14,716,548
10,219,261
10,677,042
-
13,700,963
-
121,501,887
COP
938,403,733
(1) As at December 31, 2014 and 2013, these are call center expenses for COP 115,120,062 and COP
107,314,572, surveillance for COP 1,879,291 and COP 4,248,570, bill delivery and processing COP
8,717,927 and COP 9,938,745, respectively.
26. OPERATING EXPENSES
2014
Personnel
Fees and consulting
Maintenance, repairs and materials
Public utilities
Leases
Advertising
Communication and transportation
Insurance
Contributions
Taxes
Security
Outsourcing services
Allowance for bad debt
Other provisions (1)
Provision for contingencies (See Note 21)
Depreciation
Amortizations
Printing and publications
Miscellaneous
(1) The provisions are listed below:
- 45 -
2013
COP
72,656,913
13,357,605
24,723,367
9,925,791
9,641,185
789,104
2,294,634
9,583,099
7,125,269
11,313,861
13,488,292
16,168,587
33,314,117
41,364,385
3,635,657
8,585,449
55,729,770
24,592
4,668,086
COP
62,172,939
13,816,204
20,914,849
15,974,587
7,352,607
67,778
2,409,784
1,568,421
7,810,907
9,656,617
10,420,872
15,922,515
33,280,191
10,646,035
9,782,258
9,238,631
43,576,101
149,592
4,402,653
COP
338,389,763
COP
279,163,541
Investments
Telecommunications portfolio
Other accounts receivable
Inventory
Liabilities in process
Plants, ducts and tunnels
Transportation equipment
Furniture, appliances and office equipment
Machinery and equipment
COP
11,597
36,304,731
1,302,334
75,045
348,116
3,253,398
46,223
22,941
COP
3,984
6,820,984
2,448,182
192,900
154,335
408,586
24,294
138,297
454,473
COP
41,364,385
COP
10,646,035
COP
49,865,236
10,088,685
COP
48,791,995
4,730,288
27. OTHER INCOME AND EXPENSES, NET
Non-operating income:
Financial Returns (1)
Earnings calculated using equity method
2014
Extraordinary income (2)
Revenue from exchange difference, net
Income from previous years (3)
2013
434,700,223
17,506,218
1,570,719
Non-operating expenses:
Financial
Extraordinary
Expenses from previous years (4)
Loss calculated by equity method
Community development (ICTs and corporate
responsibility)
49,264,902
42,579,207
1,030,599
COP
513,731,081
COP
146,396,991
COP
39,361,195
6,508,047
85,628,709
3,673,950
COP
47,914,078
13,059,823
11,934,575
2,906,433
4,455,262
135,171,901
Total other income and expenses, net
COP
378,559,180
80,270,171
COP
66,126,820
(1) In 2014 and 2013, the financial returns correspond mainly to the financial interest generated by bank deposits
and accounts receivable yields, among others, for COP 38,673,280 and COP 36,860,892, respectively.
(2) In 2014, extraordinary income corresponds mainly to the profit generated from the sale of shares in Colombia
Móvil S.A. E.S.P. for COP 345,646,504 (see Note 2 (d)) and recoveries for COP 68,596,434; in 2013, to
recoveries for COP 32,018,948 as follows:
Recovery of other loan portfolios
Provision for investment in Colombia Móvil
Recovery loan portfolio provision subsidies and
contributions
Provision for contingencies
- 46 -
COP
1,378,185
40,675,172
1,443,668
153,899
4,658,509
14,262,336
3,837,883
Recovery CREE tax provision
Allowance for inventory
Collection accounting cleanup
Other recoveries (a)
40,275
116,567
438,449
21,289,277
COP
68,596,434
316,941
12,004,221
COP
32,018,948
(a) This is mainly made up of the refunds made by Colpensiones for the pensions paid by the Company
while said body takes over the pensions pursuant to the Law.
(3) It corresponds mainly to COP 1,518,464 for Ingelcom using the equity method.
(4) Expenses of previous years consist of:
2014
Previous years wages and salaries
Overhead from previous years
Taxes, Contributions, and Fees
Extraordinary (b)
2013
COP
5,492,375
13,493,422
66,642,912
COP
3,514,373
3,001,927
1,688,722
3,729,553
COP
85,628,709
COP
11,934,575
(a) In 2014, this included mainly the deferred income tax of Colombia Móvil for COP 5,246,411 and COP
28,378 for the updating of the Colvatel equity method.
(b) Extraordinary expenses in 2014 include primarily COP 62,359,976 for the provision of the Telecom
process contingency due to access charges (See Note 21) and Colombia Móvil investment losses of COP
3,601,584 ( 2013 - COP 3,283,200) calculated using the cost method.
28. MEMORANDUM ACCOUNTS
Debtors
Taxes
Control
Contingent rights (1)
Collections for third parties
Accounting cleanup
Portfolio penalties
COP
Total accounts receivable
420,380,621
1,824,376,775
1,271,058,107
108,079,386
49,062,293
246,846,110
COP 3,919,803,292
- 47 -
COP
232,682,911
1,239,763,303
1,270,154,096
106,847,347
49,149,904
229,504,431
COP 3,128,101,992
Creditors
Control
Contingent liabilities (2) (Note 21)
Taxes
COP 1,181,727,107
779,882,939
601,808,645
COP 1,493,805,298
687,340,091
601,808,645
Total accounts payable
COP 2,563,418,691
COP 2,782,954,034
(1) As at December 31, 2014 and 2013, this includes primarily: i) the case against the SIC for the basic public
switched telephone network (PSTN) long distance services market lost and the unexplored market as a result
of the high pricing of this service for COP 497,841,121. ii) case against the Ministry of Information
Technology and Telecommunications for COP 458,920,000 to declare that the Company could not recover
the amount paid for the concession to provide PSTN long distance services granted by the Ministry of
Information Technology and Telecommunications. iii) case against Mercury for COP 13,768,447 for
monetary losses and damages, iv) lawsuit against Telecom due to breach of contract for COP 17,000,000. v)
Lawsuit filed against the Communications Fund for credit balance on contributions prior to the year 2009 for
COP 21,897,152. vi) action against the Caja Nacional de Previsión Social for the collection of pension
payments in the amount of COP 15,740,724. vii) Lawsuit against Ministry of Information Technology and
Telecommunications for the annulment of Resolution 2234 / 2012 and the recognition of the deficit created
by the application of Law 812 / 2003 in the amount of COP 49,725,401.
(2) As at December 31, 2014 and 2013, it includes mainly: i) the proceedings filed by Atelca against ETB for the
failure to comply with conventional clauses for COP 300,000,000 ii) proceedings with Telefónica Móviles
S.A. for access charges that ETB failed to pay in accordance with Resolution No. 463 / 2001 issued by the
CRC for COP 41,272,833. iii) proceedings with Colombia Telecomunicaciones S.A. for access charges
resulting from the contract signed with ETB in June 1999 for COP 42,000,000, iv) proceedings with UNE
EPM Bogotá S.A. for access charges from August 2000 to date; the claims are for COP 35,000,000, v)
proceedings with Empresas Municipales de Cali for access charges for interconnecting traffic flowing from
April 24 to August 6, 2010 for COP 46,504,451 and vi) proceedings with Comcel, now Claro, for the request
to annul the arbitral award for COP 78,000,000.
29. FINANCIAL INDICATORS
Indicator
Liquidity
Current Ratio:
(Current Assets /
Current Liabilities)
Debt
Total level of debt:
(Total Liabilities / Total
Assets)
Short-term debt:
(Total Current
Liabilities / Total
Assets)
Total long-term debt:
(Total Long-term
Liabilities / Total
Assets)
Expression
2014
(times)
2.26
2013
Indicator Explanation
1.84 Indicates the Company's
capacity to service its short-term
debts by committing its current
assets.
%
32.62%
36.29% This indicator shows the degree
of leverage corresponding to
creditors' share in the
Company's assets.
%
14.31%
16.19% Represents the percentage of
debt to third parties with shortterm maturities.
%
18.32%
20.10% Represents the percentage of
debt to third parties with
medium and long-term
maturities.
- 48 -
Activity
Commercial loan
portfolio turnover:
(360/(Revenue / Total
Portfolio))
Supplier turnover:
(360/(Cost of sales /
accounts payable
suppliers))
Profitability
Gross profit margin:
(Gross Profit / Revenue)
Days
79
69 Indicates the average turnover of
the commercial loan portfolio in
the year.
Days
82
97 Indicates the average number of
days it takes the Company to
make payments to suppliers.
This calculation was made
excluding taxes and dividends
payable.
%
31.11%
Operating Margin
(Operating Profit /
Revenue)
%
6.31%
Net profit margin: (Net
Profit / Revenue)
%
27.16%
Return on equity: (Net
Profit / Total Equity)
%
10.80%
Return on assets (ROA)
(Net Profit / Total
Assets)
%
7.28%
- 49 -
31.09% Shows the Company's capacity
to manage sales, to generate
gross profit, that is to say, before
administrative expenses, sales
costs, other revenue, other
expenditures and taxes.
10.60% Indicates the contribution of
each Peso of sales in the
generation of operating profit.
12.42% Represents the percentage of net
sales that generate profit after
taxes in the Company.
5.46% Represents the return on
shareholder investment.
3.48% Measures the net profit
generated by each Peso invested
in total assets.