2. Operating costs

(a) Breakdown of each of the activities (direct and joint customer-oriented and network-oriented activities) allocated to the DTT product, per operating cost

MEO submitted an electronic file with the breakdown of each basic activity for the various operating, depreciation and capital costs.

MEO further refers that, in the light of synergies which arose due to the simultaneous provision of ATT and DTT, it opted for including in the conveyed information the breakdown of costs for the ADD service, per activity, for years under analysis (2010, 2011 and 2012).

Operating costs for the ATT service amounted, in 2012 to [BCI]     [ECI] Euros (pus [BCI]     [ECI] Euros for depreciations and [BCI]     [ECI] Euros for cost of capital).

(b) Detail and supporting evidence, duly reasoned, of all operating costs registered in activities and sub-activities, with the mention of the respective allocation driver, taking into account costs with:

B1.  Preventive maintenance of transmitters, power supply equipment and air conditioners and corrective maintenance

According to MEO, these costs were assigned to DTT on the basis of the hour report presented in the staff cost item.

B2.  Contracts for maintenance of the Digital Broadcasting Centre and transmitter HW repair contract

MEO refers that, by mistake, costs with the contract for Head-End maintenance were not assigned to the DTT service. This was due to the fact, according to MEO, that the company bore an annual cost of [BCI]     [ECI] Euros with the Novabase for the maintenance of all Head-end and not only DTT Head-End. The DTT service should be considered [BCI]     [ECI] of that value, that is, it entailed an annual cost of [BCI]     [ECI] Euros.

MEO further informs that costs it bears with the repair of broadcasting and power equipment exclusively engaged to the DTT service, amount to [BCI]     [ECI] Euros for 2010, 2011 and 2012, being broken down in the information included in the electronic file.

B3.  Occupation of the existing transmission system and basis on which costs were determined

MEO refers that costs with the transmission system of the DTT product are registered in the “L-Interconnection Network” activity, having submitted in an electronic file the detail by cost nature of the full operating costs assigned to this activity. These operating costs amounted, in 2012, to [BCI]     [ECI] Euros.

According to MEO, just like in the case of fixed assets of the interconnection network (fibre-optic, DWDM equipment, pipelines, multiplexing equipment, masts, cables and power equipment), these costs are allocated to the DTT product via an activity driver, which, for most cost components, is based on a circuit pool and/or use of equivalent circuits.

B4.  Energy consumption of equipment assigned to DTT and occupation of interior space and tower space assigned to DTT service and assumptions associated to their determination

MEO presented costs with buildings engaged to the DTT product in 2012, according to the table below, having costs identified as corresponding to organisational departments been engaged to DTT on the basis of the hour report presented in the staff cost item:

Table 13.Costs with buildings engaged to the DTT product in 2012
[BCI]

Costs assigned to buildings	Depreciations	Cost of capital	Operating costs	Total	Weight
Buildings - Pseudo 19TDT					81%
Organisational departments					11%
Pseudo 21EA and 19 EA					3%
Others					5%
Total					100%

Detail of  pseudo 19TDT	Depreciations	Cost of capital	Operating costs	Total
Electricity
Water
Rents
Maintenance and repairs
Surveillance and security
Cleaning up services
Insurance
Taxes
Others
Total

Values in Euros
[ECI]

These values are detailed in electronic format, including detail for 2012, 2011 and 2010¹.

Further to a request for clarification made by ANACOM on the meaning of “organisational departments” and “Pseudo 21 EA and 19 EA”, MEO referred that, as the classification of fixed asset goods made by general accounting fails to meet the totality of needs of MEO’s CAS, “Pseudo-Departments” were created².

Costs of buildings engaged to the DTT service arise, according to MEO, mainly from four sets of departments:

(a) Pseudo 19 DTT – which includes all fixed assets associated to buildings, for the specific use of the DTT service;

(b) Organisational departments - building costs that are allocated to the various products and services according to the contribution of these departments for their provision, including the DTT service, the allocation driver being achieved through staff reports;

(c) Pseudo 19EA - incorporates fixed asset goods associated to Automatic Stations (EA);

(d) Pseudo 21EA - incorporates fixed asset goods associated to air conditioners (EA).

According to MEO, the rationale underlying the assignment of costs to activities consuming these resources is based on their investment values obtained on the basis of gross fixed assets and respective cost relation for each of their origin resources/fixed-assets accounts.

B5.  DTH complementary coverage

According to MEO, costs with DTH complementary coverage, namely investments in the NAGRA platform and Head-End licenses (of the Head-End, per STB, and Quative, per customer), as well as annual O&M hardware costs and licenses which were not assigned to the DTT service, but to MEO SAT.

B6.  Use of radio spectrum

According to MEO, in 2010 and 2011, an annual cost of 180 thousand Euros was borne with DTT radio fees. In 2012, the value amounted, according to MEO, to 285 thousand Euros, having the fee for rights of use for frequencies, amounting to 75 thousand Euros, been incorrectly accounted for as ATT³.

B7.  Staff, with identification of the number of collaborators directly engaged with DTT, broken down by class and activity involved in this service (for example, commercial area, technical area, customer support and SI), staff basic cost for each class and other assumptions associated to the determination of staff costs

MEO presented an electronic file with details of costs of staff engaged with the DTT and ATT service, as well as a breakdown of all costs allocated to these products, on the basis of an allocation driver performed based on the CAS time report.

The following summary table was also presented on costs of staff engaged with the DTT service, for 2010, 2011and 2012, on the basis of the CAS time report.

Table 14. Costs of staff assigned to the DTT service, in 2010, 2011 and 2012
[BCI]

Areas	2012		2011		2010
	#FTE	Annual cost	#FTE	Annual cost	#FTE	Annual cost
Technical area
Commercial area and customer support
Regulation and support
Total directly assigned to TDT
Other activities
Total

Values in Euros

Detail according to nature of cost of DTT-specific activities	2012 Annual cost	2011 Annual cost	2010 Annual cost
1 - Remunerations
2 - Social contributions
3 - Others
4 - Running P&S
5 - Investments
Total [1]+[2]+[3]+[4]+[5]

Values in Euros
[ECI]

B8.  Other components

MEO submitted an electronic file with the description of other operating costs, indicating also drivers that were used to allocate these costs to DTT and ATT products.

(c) Common costs

C1.  Driver for the allocation of common elements (for example, towers or other relevant elements) to the various services

MEO submitted an electronic file with drivers for the allocation to DTT and ATT products of other operating costs that were not referred in the preceding paragraph, most of which are common elements to various costing objects of CAS.

C2.  Detail of common costs, per value and nature, allocated to the DTT service

MEO refers that, in the scope of CAS, common costs, by their nature, are distributed among the various products and services according to a single rule, which is the proportionality to direct and joint costs, excluding cost of capital.

MEO stresses that the basis of distribution of common costs excludes costs that do not integrate the productive process of the company, which is constituted by direct and joint activities, borne by definition by common costs. In this sense, according to MEO, costs concerning sub-contracts, goods sold and financial contributions, among others, are excluded.

According to MEO, these common costs have two different natures, namely:

(a) The so-called “business activities”, due to the absence of an appropriate driver for their allocation to products, and which are basically supporting activities;

(b) Resources allocated to the “common” activity via accounts that, by their nature (such as the remuneration of governing bodies) or the lack of appropriate allocation drivers, are a priori classified as common, and also remaining values from pools which were not allocated to activities or products, due to the non-existence of specific drivers.

All this information, as well as the breakdown of the whole of common costs, has been provided, according to MEO, in the addition information (point 1h) made available to ANACOM in the scope of annual results of its CAS.

MEO illustrated, in the table below, the low weight of common costs in the whole of DTT and ATT services, compared to the whole of common costs considered in its CAS, for each of the years under analysis (2012, 2011 and 2012).

Table 15. Common costs
[BCI]

Year	Total CAS	DTT	Weight %	ATT	Weight %	DTT+ATT	Weight %
2012
2011
2010

Values in Euros

 

[ECI]