to download Telecom Italia Annual Report 2011 - Company Reporting

Acquisition of Tim Fiber SP and Tim Fiber RJ
On October 31, 2011, through the subsidiary Tim Celular S.A., telecommunications infrastructure
operators in the states of São Paulo and Rio de Janeiro were acquired from Companhia Brasiliana de
Energia and the companies were renamed Tim Fiber SP and Tim Fiber RJ. The acquisition had a total
impact on net financial debt of 686 million euros as a result of the outlay of about 656 million euros
(including transactions costs) and the consolidation of the financial debt of the acquired group.
As a result of the above operation, a 100% interest has been acquired in the company Tim Fiber SP and
a 98.3% interest, subsequently increased to 99.1%, in the company Tim Fiber RJ. A tender offer was
made to purchase the remaining 0.9% of the latter which was concluded at the end of February 2012
and brought the percentage interest to 99.7%. The accounting effects of the business combination have
been calculated based on 100% ownership, as set forth in IFRS 3, and can be summarized as follows on
a provisional basis:
• the measurement of the consideration for both companies is equal to 657 million euros and is
inclusive of the non-controlling interest which is in the process of being acquired;
• all the assets acquired and the liabilities assumed of the acquired group have been measured for
their recognition at fair value. During the course of 2012 - and in any case within 12 months of
acquisition – the provisional amounts of the assets and liabilities recorded at the acquisition date
could be adjusted with retroactive effect to take into account their acquisition-date fair value with
the consequent recalculation of goodwill. Besides the amounts of the assets acquired and liabilities
assumed, total goodwill was recognized for 556 million euros, calculated as illustrated in the
following table:
(millions of euros)
Tim Fiber SP
Fair value
amount
Tim Fiber RJ
Fair value
amount
Measurement of consideration (a) 461 196 657
Value of net assets acquired (b) 53 48 101
Goodwill (a–b) 408 148 556
Total
The most important acquisition-date amounts of the assets and liabilities of the companies Tim Fiber SP
and Tim Fiber RJ are summarized as follows:
Tim Fiber SP and Tim Fiber RJ – acquisition-date amounts
(millions of euros)
Tim Fiber SP
Fair value
amount
Tim Fiber SP
Carrying
amounts
Tim Fiber RJ
Fair value
amount
Tim Fiber RJ
Carrying
amounts
Goodwill arising from the
business combinations 408 148
Other non-current assets 77 77 54 54
Current assets 23 23 16 16
Total assets (a) 508 100 218 70
Total non-current liabilities 32 32 10 10
Total current liabilities 15 15 12 12
Total liabilities (b) 47 47 22 22
Net assets (a-b) 461 53 196 48
Had the acquisition operation been finalized on January 1, 2011, higher revenues would have been
recorded for about 60 million euros in the consolidated financial statements of the Telecom Italia Group
without any significant effects on the net loss for the year.
Telecom Italia Group
Consolidated Financial Statements
Note 3 – Business combinations 176