Report and Opinion of the Statutory Audit Committee


/ Updated on 03.01.2006
1. Summary of action undertaken

In accordance with the legal and statutory provisions, in particular under the terms of para c) of article 12 of the Statutes of the Instituto das Comunicações de Portugal (ICP), approved by Decree Law nº 283/89 of August 23rd, it is our duty to submit the report on our audit and express an opinion on ICP's Annual Report and Accounts for the fiscal year ending on December 31st 2000.

The Statutory Audit Committee held meetings and followed through the most relevant aspects of the management of the Institute, in particular the implementation of the budget, and:

- analysed, on the basis of a sampling, the financial information available, with a favourable result;

- took note of the External Report and Audit drawn up by the firm KPMG, Peat Marwick, S.A., responsible for carrying the Audit of ICP's Accounts of fiscal 2000. This firm collaborated with the Chartered Accountant to assist him in discharging his specific duties.

It may be pointed out that we did not take into account the opinion of the Advisory Board.

2. Legislative Framework

According to the Annual Report and Accounts, ICP followed the legal framework of the sector, with special emphasis on the following: in the telecommunications area, Order of the Ministry of Social Equipment nº 12.809/2000 (III Série), which introduced operator portability; in the UMTS area, Ministerial Ruling nº 532-A/2000, which regulated the call for tenders for four nation wide licences for international mobile telecommunications; and in the area of radio communication, Decree law nº 151-A/2000, which lays down the regime applicable to the licensing of networks and radio communication stations and the supervision of installation of the said stations and the utilization of the radioelectric spectrum.

3. ICP's activities

In the year under review ICP returned to keeping pace with the growth and dynamism expressed world wide by the communications sector, both domestically and internationally.

The Annual Report and Accounts submitted by the Board is clear and thorough in terms of characterizing the activity undertaken in fiscal 2000. As indicated therein, the Institute's activity was marked by the launch of the bid for four licences for the international mobile telecommunications systems (IMT2000/UMTS), involving a far reaching impact for the years to come.

4. Human Resources

In the area of human resources, the number of collaborators in service at the end of 2000 rose 2.9% compared with the same period in the previous year. This development was driven by the increase in the Institute's remit, due to the high level of development of the sector and the structural changes taking place

Here is a summary table:

 

Contracts

2000

1999

Variation

N.º Workers

%

Co-opted56(1)(20,0)Permanent371355164,3Fixed term1620(4)(20,0)Total392381112,9

5. Investments

The following tables indicate budget variations for fiscal 2000:

PTE 103 

Items

Implemented

Budgeted

Variation

Amount

%

Lands and buildings 99.047 64.000 35.097 54,84
Basic and radioelectric equipment 36.495 282.900 (246.405) (87,10)
Transport equipment 31.565 74.500 (42.935) (57,63)
IT equipment 598.870 796.500 (197.630) (24,81)
Other adm. equip. & sundries 89.480 41.900 47.580 113,56
Refurb. of facilities 36.413 40.000 (3.587) (8,97)
Total Investment 891.920 1.299.800 (407.880) (31,38)

In the overall reckoning, the level of investment made was below what was budgeted at 31.38%.

The following projects contributed to the deviation observed. Thus:

PTE 103 

Projects

Implemented

Budgeted

Variation

Amount

%

Integrated IT sil. for spectrum management 199 180.000 (179.801) (99,89)
Technological modernization spectrum monitoring 19.761 53.000 (33.239) (62,72)
Remote broadcasting stations control --- 7.000 (7.000) (100,00)
Remote monitoring for DMD (Madeira branch) and DAC (Azores branch) --- 100.000 (100.000) (100,00)
Technological outfit of DMD --- 39.000 (39.000) (100,00)
Works at DMD building 27.108 23.000 4.108 17,86
Integrated Management calibration plan system 104 500 (396) (79,20)
Tech. upgrade of CATV laboratory --- 10.000 (10.000) (100,00)
Tech. upgrade of wireless laboratory 3.398 30.000 (26.602) (88,67)
Tech. upgrade of the Electreomagnetig Compatibility laboratory 2.244 30.000 (27.756) (92,52)
Buildings Improvement & Acqui. - Barcarena 60.157 30.000 30.157 100,52
E/S workflow documental management 20.893 270.000 (249.107) (92,26)
Management indicators --- 15.000 (15.000) (100,00)
Deleg. Powers organiz. efficiency --- 15.000 (15.000) (100,00)
Billing solution 31.374 50.000 (18.626) (37,25)
Human resources solution --- 100.000 (100.000) (100,00)
Other current invest. + refurb. works 726.682 347.300 379.382 109,24
Total 891.920 1.299.800 (407.880) (31,38)

6. Costs and Losses and Operating Income and Earnings

The following table explains the deviations observed in the face of the budget for the year 2000. Thus:

PTE 103 

Items

Results

Budgeted

Variation

Amount

%

Operating Income & Earnings        
Service provision 11.677.445 8.948.400 2.729.045 30,50
Additional operating income 2.098 2.000 98 4,90
Operating subsidies 76.909 138.000 (61.091) (44,27)
Operating financial income & earnings 412.392 96.000 316.392 329,58
Extraordinary operating income & earnings 480.918 66.000 414.918 628,66
Total 12.649.762 9.250.400 3.399.362 36,75
Costs & Losses        
External supplies & services 1.980.597 2.544.500 (563.903) (22,16)
Personnel Costs 2.687.853 2.721.200 (33.347) (1,23)
Amortization & depreciation 815.847 950.400 (134.553) (14,16)
Provisions --- 660.600 (660.600) (100,00)
Taxes 3.932 3.200 732 22,88
Other operating costs & losses 875.373 885.600 (10.227) (1,15)
Financial costs & losses 4.127 1.700 2.427 142,76
Extraordinary Costs & losses 393.411 101.000 292.411 289,52
Total 6.761.140 7.868.200 (1.107.060) (14,07)

The Net Result of the Fiscal year in 2000 rose to PTE 5,888,620,000, whereas in 1999 it had been PTE 2,748,736,000, showing a positive variation of PTE 3,139,884,000.

The main deviations are duly justified in the Management Report 2000, where the deviation tends to be higher than what is budgeted in the billing of fees for radioelectric spectrum utilization, brought about by the significant increase in the public service mobile telecommunications activity.

7. Annual Report and Accounts

7.1.The Statutory Audit Committee conducted it's action with a view to checking the financial, accounting, administrative and management aspects and then issued its opinion on the report and accounts, in accordance with ICP's Statutes and, subsidiarily, what is applicable to public undertakings.

7.2.The Management Report and the Annual Report and Accounts for 2000, submitted by the Board, clearly define the macro-economic and sectorial framework in which ICP's action is developed. They also define ICP's activities, the trends in human and material resources and the economic and financial situation for the fiscal year ending December 31st 2000.

7.3. The financial statements and the accounting system upon which those statements are based are the ones overall in keeping with the Official Accounting Plan and appropriately and substantively reflect ICP's networth as at December 31st 2000, as well as the results of its operations in the fiscal year ending on that date.

The various accounting criteria adopted are in keeping with tose used in the previous fiscal year.

7.4.As mentioned in notes 3 and 31 of the Annexe to the Balance Sheet and the Statement of Profits and Losses, ICP set up on October 1st 1996 an independent pension fund in order to cover and fund the liabilities for the payment of the pensions of the staff co-opted from the former CTT - Correios e Telecomunições, E.P.

According to the actuarial study carried out by the management company of the Pension Fund - BPI - Pensões, the current sum of ICP's liabilities stands at PTE 2,006,700,000 and is fully covered as at December 31st 2000.

We do stress that the liabilities for services rendered prior to the date of integration of the respective beneficiaries in ICP, the liability of the former CTT in the order of PTE 1,719,600,000 are not covered. This sum figures in the Balance Sheet as at December 31st 2000, under the item "Other Debtors and Creditors", pending payment by the former CTT. At the date of this report, we are not in a position to reach any conclusion as to whether this sum could be recovered.

7.5. According to Accounting Directive nº 19 of the Accounting Standardization Commission, and following the procedure adopted in 1999, ICP opted to recognize the total liability for the health care of its retired and working staff, and charged to the 2000 results the sum of PTE 14,936,000;

7.6. We would like to point out that in this fiscal year, ICP registered a sum of PTE 153,083,000 in shares, co-shares, costs and sundry expenses (as per note 51 in the Annexe to the Balance Sheet and the Statement of Profits and Losses), under the terms of the protocol reached with the founders of the "Fundação Portuguesa das Comunicações" (Portuguese Communications Foundation).

8. Opinion

In view of what has been set out and except for the situation mentioned in the last paragraph of point 7.4 of this report, we are of the opinion that that the following deserve to be approved:

  1. the Annual Report and Accounts submitted by the Board of the Instituto das Comunicações de Portugal, for the fiscal year ending on December 31st 2000; and
  1. the transfer of the Net Result of the fiscal year in the order of PTE 5,8888,620,000 to the account investment reserves, as per the terms of nº 3 of article 22 of the Statutes.

And lastly, the Statutory Audit Committee note with appreciation and is thankful for all the collaboration afforded to it by the Board and by all the Services contacted.

Lisbon, April 6th 2001

THE STATUTORY AUDIT COMMITTEE

Mr Henrique Armando Antunes Ferreira - Chairman

OLIVEIRA, REIS & ASSOCIADOS
Chartered Accountants  Represented by Mr José Vieira dos Reis, licence nº 359 - Member

Mr Duarte Nuno de Carvalho Gomes de Castro - Member