Framework

The cost of capital is an important part of the cost of products and services, it being crucial to determine a methodology that makes it possible to determine reasonably, without any accounting or analytical constraints, the rate of cost of capital appropriate for a return on the investments of PT Comunicações, S.A. (PTC).

In this context, considering that (i) the methodology for calculating the cost of capital has not been revised since its implementation, and may therefore be inappropriate to the current situation, and (ii) the determination of certain parameters (e.g. gearing, tax rate, cost of borrowed capital) was not independent of PTC’s management decisions, ICP-ANACOM, in a decision of 10/02/2010 ¹, defined the methodology to calculate the rate of the cost of capital of PTC, applicable to the 2009-2011 three year period. This Decision also intended to minimize the unpredictability related to the calculation of the cost of capital of PTC, and simultaneously to ensure greater regulatory certainty in the context of improved transparency for all parties involved, insofar as the process of allocating the cost of capital which has been followed historically used to be undertaken after the financial year in question.

As a result of the study conducted by ICP-ANACOM, and after a market consultation, the rate of the cost of capital established for the 2009 – 2011 three year period was 10.3%, while at the same time PTC was given a transition period to allow the company to adjust its operation to the rate of the cost of capital resulting from this change in methodology (12.3% in 2009, 11.3% in 2010, and 10.3% in 2011).

Nonetheless, the decision foresaw that should any extraordinary situation arise that had a significant impact on the premises considered in the parameters external to PTC (risk-free interest rate, interest rate and risk premium), during the period under consideration, these parameters could be subject to review.
 
Such review, as long as it was properly justified, could be started up to the end of the first quarter of the financial year following the year in question, by the initiative of ICP-ANACOM or PTC, considering any deviation above 0.5 per cent of the rate of the cost of capital of PTC defined under Decision of 10/02/2010 to be significant.