Financial Statements - Entel

EMPRESA NACIONAL DE TELECOMUNICACIONES S.A. & SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor Transalation Purposes OnlyIn line with the above, from October 1, 2012, and in line of the above changes, Entel PCSTelecomunicaciones S.A. began to record the total value of postpaid mobile handsets against costsupon signing the contracts for the lease of equipment.Prior to this date, the cost of 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 made by Entel PCS Telecomunicaciones S.A. have been fully recordedunder revenue at the moment they are provided since October 1, 2012.In consideration of the above, the permanent and transitional effects of these changes, appliedduring the fourth quarter to the consolidated income as of December 31, 2012, with respect to theprevious accounting procedure, result in a net loss allocation against profit reaching the value ofTh. 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 postpaid handsets activity 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.- 88 -