2. Activity undertaken in order to calculate the CLSU

On 09.06.2011, in compliance with article 95 of the LCE and in accordance with article 96 of the same law, ICP-ANACOM approved a decision on the concept of unfair burden and on the methodology to be used to calculate the CLSU, following a public consultation procedure and prior hearing of interested parties.

It was established in paragraph 4 of the decision on the concept of unfair burden that the methodology to be used to calculate the CLSU, as approved by ANACOM, will be applied in the period subsequent to 01.01.2007 and until such time as the provider(s) of the universal service (designated by means of public tender) commence provision of this service.

In the determination on the methodology to be used for calculating the CLSU, PTC was made subject to the obligation to submit the preliminary values of the CLSU to ICP-ANACOM from 2007 to 2009 according to the methodology defined by ICP-ANACOM, as well as all relevant information used for its calculation.

It is noted, in general terms, that the methodology adopted by ICP-ANACOM determines that the calculation of the CLSU shall stem from the calculation of direct net costs having direct measurable impact on the accounts of the universal service provider and the indirect benefits associated with advantages (in some cases intangible) from which the universal service provider derives gain as a result of its designation.

In this context, determination of CLSU is based on the costs that the universal service provider would avoid and the revenues that would be lost in the event that, as a result of it not having universal service obligations, it did not supply the service in geographic areas which are not profitable and did not supply the service to non-profitable customers in profitable geographic areas, and also that it did not supply the service according to conditions that deviated from normal commercial conditions.

Costs and assets of the universal service provider are to be valued at historical cost, as those presented in the company's financial statements. The CLSU also includes an income portion in respect of the cost of capital.

In the determination of 09.06.2011 on the methodology to be used for calculating the CLSU, it was also determined that the components comprising the calculation of the CLSU be audited by an independent body, prior to ICP-ANACOM's determination of the value of CLSU.

Subsequent to approval of the determination of 09.06.2011, approval was also given to the following determinations, which are relevant for purposes of calculating the CLSU:

• determination of 29.08.2011 which gave legal provenance to the claim presented by PTC and amended the determination of 09.06.2011 on the methodology to be used for calculating CLSU, in order that the prices actually charged are used to determine non-profitable areas and non-profitable customers in profitable areas, as well as to establish non-profitable CLSU zones/customers, thereby correcting the methodology;
   
• determination of 25.11.2011 on the application of an effect of demand-price elasticity on the component associated with retirees and pensioners. In this determination it has been stipulated that the elasticity value to be considered for calculating the CLSU should be -0.1;
   
• determination of 12.10.2012 which implemented the concept of "unusually high access costs" for determining non-profitable customers in profitable areas and consequently for the calculation of the CLSU.
   
• determination of 20.06.2013 on the results of the audit of the CLSU of PTC with respect to the 2007 to 2009 financial years.

It is incumbent upon ICP-ANACOM to ensure that the CLSU estimates presented by PTC are audited and to approve the CLSU values, pursuant to paragraph 4 of article 96 of the LCE; as such ICP-ANACOM adopted a series of determinations in this regard, as follows:

• 27.04.2012 - launch of a public tender, on 28.11.2011, for auditing of the CLSU estimates presented by PTC for the 2007 to 2009 financial years, in order to check the conformity of the calculation presented with the methodology defined by ICP-ANACOM;
   
• 06.08.2012 - award to SVP Advisors, S.L. (SVP) of the auditing of the CLSU estimates presented by PTC for the 2007-2009 financial years;
   
• 20.06.2013 - consultation authorisation to AXON Partners Group Consulting S.L.¹ (AXON) to perform auditing of the reformulated CLSU estimates for the 2007 to 2009 financial years;
   
• 27.06.2013 - award to AXON Partners Group Consulting S.L. (AXON)² of the auditing of the reformulated CLSU estimates for the 2007 to 2009 financial years.

The first audit consisted of a thorough, systematic and comprehensive analysis of the CLSU estimates presented by PTC for the 2007 to 2009 financial years, including the review of calculations and sources of information, as well as the identification and analysis of any limitations, discrepancies, alternative approaches and all relevant matters related to the employed methodology.

Upon conclusion of the audit, on 11.04.2013, ICP-ANACOM approved a draft decision on the results of the audit of the CLSU of PTC in respect of the 2007 to 2009 financial years, which was submitted to a prior hearing of interested parties and the general consultation procedure.

Upon conclusion of the hearing and consultation process and following analysis of the contributions received, on 20.06.2013, ICP-ANACOM approved the corresponding final decision on the results of the audit of the CLSU of PTC in respect of the 2007 to 2009 financial years.

Following this determination, on 28.06.2013, PTC submitted the reformulated CLSU estimates to ICP-ANACOM (within the period allowed for the purpose), in respect of the 2007-2009 period, stating that these estimates incorporated the following aspects: (i) recognition of non-recurrent installation costs and revenues in annualized form; (ii) correction of inaccuracies detected as regards area models (reconciliation of the number of access lines) and public pay-telephones (formulas associated with input data); and (iii) incorporation of the results of the SCA - Sistema de Contabilidade Analítica (Analytical Accounting System) used by PTC for the 2007-2009 period, in accordance with ICP-ANACOM determinations of 4 April and 6 June 2013.

It was further determined by this decision that the reformulated CLSU estimates for the 2007-2009 periods, as presented by PTC, should be submitted to a new audit procedure, in order to confirm that the re-submitted values were in conformance with the amendments made to the SCA, as used by PTC with respect to these periods, and in compliance with the stipulations of sections 1 e) and 1g) of the decision as regards the consideration of non-recurring installation costs/revenues in annualized form and correction of area models in terms of the number of access lines.

Since it is incumbent upon ICP-ANACOM to ensure that the estimates presented are audited and to approve the CLSU values, pursuant to paragraph 4 of article 96 of the LCE, on 27.06.2013, ICP-ANACOM contracted AXON to audit the reformulated CLSU estimates presented by PTC for the 2007 to 2009 financial periods. The respective audit report was subsequently delivered by the auditors on 25.07.2013 (this report is in annex to the present decision together with the respective declaration of conformity).

On 01.08.2013, ICP-ANACOM approved the respective draft decision, which was made subject to general consultation and a prior hearing of interested parties, over a period of 20 working days.

Under this procedure, comments were received from six operators; these were summarized and examined in the report of the public consultation and prior hearing, which forms part of the present decision.

In the following chapters reference is made to the results of the audit and its principal conclusions, as well as to the positions taken by ICP-ANACOM with respect to its results. Additionally, an analysis is presented of the CLSU values for the 2007-2009 period.