Financial Statements - Entel

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EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor Transalation Purposes OnlyThe constitution of the board and the appointment of the members of the DirectorsCommittee is to be undertaken shortly and will be communicated to the Supervisor andother appropriate bodies in a timely manner.III. Parent Company – Management ChangesLetter 9, dated May 8, 2012, communicated that at the board meeting held the previous day,agreement was reached to:– Form of the board of directors of Empresa Nacional de Telecomunicaciones S.A., appointing JuanHurtado Vicuña as Chairman and Luis Felipe Gazitúa Achondo as Vice-Chairman.– The Directors Committee was formed in line with Article 50 of the Public Limited CompaniesAct. The members are Alejandro Pérez Rodríguez, Luis Felipe Gazitúa Achondo and Richard BüchiBuc.IV. Parent Company – Distribution of DividendLetter 13, dated November 6, 2012, communicated that at the board meeting heldthe previous day, agreement was reached to pay a provisional dividend ofCLP $150 per share, payable on December 12, 2012, and allocated against the profitsup to the third quarter of the year.This makes the total payment for the provisional dividend Th. CLP $35,478,554,which represents 24.67% of the profit as of the third quarter of 2012.V. Parent Company – OtherBy Letter 3, dated January 28, 2013, the board meeting of Empresa Nacional deTelecomunicaciones S.A. held on the same date, approved the annual consolidated financialstatements for the Company for the year ended December 31, 2012.These financial statements have been prepared using the new accounting procedures for providingpostpaid customers with mobile handsets used by the subsidiary Entel PCS S.A.This new procedure is in line with the contracts for the telephone services and leasing of mobilehandsets governing the commercial relationships between the Entel PCS subsidiary and itscustomers, the conditions of which were modified as a result of a collective mediation process for- 86 -
EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor Transalation Purposes Onlyapplication contracts brought against various mobile phone operators by the National ConsumerService.In line with the above, from October 1, 2012, and in line of the above changes, the subsidiary beganto record the total value of postpaid mobile handsets against costs upon signing the contracts forthe lease of equipment.Prior to this date, the cost of the handsets was classified under fixed assets, as permitted by thecontractual conditions in force prior to the aforementioned changes, and depreciated over 12months, meaning that the historical base of postpaid handsets up to September 30, 2012, willremain unchanged and continue to be depreciated over the corresponding period, thus having adecreasing impact until extinguished on September 30, 2013.Furthermore, and also in line with the aforementioned changes, the charges for activating handsetsfor postpaid customers have been fully recorded under revenue at the moment they are providedsince October 1, 2012.Considering the above, the permanent and transitional effects of these changes, applied during thefourth quarter to the consolidated income as of December 31, 2012, with respect to the previousaccounting procedure, result in a negative net allocation against profit reaching the value of Th.CLP $13,695,473.Even though this new accounting procedure does not result in predictable permanent effects in itsown right, which will to a greater or lesser extent derive from subscription handsets for eachperiod, for the aforementioned reasons it will have a negative, transitional and decreasing impacton consolidated profits until the third quarter of 2013, but will not impact the company’s cash flowsor its financial value.VI. Entel PCS Telecomunicaciones S.A. – OtherBy Letter 4, dated January 28, 2013, the board meeting of Entel PCS Telecomunicaciones S.A., heldon the same date, approved the consolidated financial statements for the company for the yearended December 31, 2012.These financial statements have been prepared using the new accounting procedures for providingpostpaid mobile handsets for Entel PCS Telecomunicaciones S.A.This new procedure is in line with the contracts for the telephone services and leasing of mobilehandsets governing the commercial relationships between Entel PCS Telecomunicaciones S.A. andits customers, the conditions of which were modified as a result of a collective mediation processfor application contracts brought against various mobile phone operators by the NationalConsumer Service.- 87 -
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