Annual - Angola Cables

Annual

Report

Annual Report 2015

Contents

Message from the CEO

1. Summary of Activity

Main Indicators

Results in 2015

Forecast for 2016

2. Angola Cables

Angola Cables Background

Corporate Governance

Business

Strategy

3. Context

Macroeconomic

Telecommunications Sector

4. Analysis of Activity

Commercial

Technical

Human Talent

Social Responsability

5. Financial Analysis

6. Financial Statements

7. Annexes

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Annual Report 2015

Message from the CEODear Shareholders,

In its third year of commercial activity, the companyachieved a positive net income. EBITDA was five timeshigher than the previous year thanks to an increase inrevenue (65%) and the containment of operatingexpenses. The growth in EBITDA margin reflects thesubstantial improvement in operational efficiency. Theseresults were obtained during a year in which the companyfaced difficulties both in terms of the national economicadjustment process and the cut in the WACS submarinecable. The structuring of financing for the new submarinecables impacted enormously on the management's focusduring the year.

The Monet cable project was developed in 2015 inaccordance with the contract working plan. Angola Cableshad a very active participation in the governance of theproject, in terms of technical aspects and decision-making. Challenges have been faced regarding themanagement of the project. We have, however, beenfocused on completing the project within the agreed timeframes and have therefore been overcoming thedifficulties in a timely manner.

During the second half of 2015, there was a change in thefunding structure for the new projects. Coordinated bythe Ministry of Finance with the assistance of the Ministryfor Telecommunications and Information Technologies(MTTI), the new financing model for the strategic projectswas established and construction of SACS was finally ableto go ahead, with work beginning in the first quarter of2016.

The company's management cares about establishingstrategic partnership relationships with the Ceará stateand Fortaleza municipal authorities in order to ensurefuture cooperation in developing business in the region inthe areas of ICT and media. These authorities have beenbehind a growth in the prospects of use of the datacentre by local companies. The culmination of thispartnership was the conclusion of the land concessionagreement for the plot in the Praia do Futurotechnological park, where Angola Cables will be buildingthe data centre and SACS landing station, as well as theoperations centre. However, since the Monet partnersdid not approve the construction of the station on landbelonging to the Prefecture, new land was acquired, onwhich the Monet cable station will be built. As well asbeing the owner of the Monet station, Angola Cables willcontinue to invest in and promote its data centre and theSACS station.

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In the final quarter of 2015, the first WACS submarinecable upgrade was completed, resulting in a fourfoldincrease in Angola Cables's capacity. The substantialincrease in available capacity will allow the company tofocus on growing sales in the international market, inparticular the African market. The cut in the WACSsubmarine cable in shallow waters near the Sanganostation was a heavy blow to the company anddemonstrated, in the worst possible way, the need for amutual and permanent restoration solution betweenWACS and SAT-3.

The international development of the business, includingpreparing for commercial entry into Brazil with the newcables and the data centre, as well as the development ofthe IP transit network, are important challenges facingthe company in 2016. The company has succeeded inlearning and growing from challenges, as well as adaptingto changing situations and taking advantage of valuecreation opportunities.

The results achieved are the fruits of the entire team'sperformance and commitment. There is now morealignment between company and employee objectives, aswell as constant striving for improvement on both anindividual and collective level. Our customers andsuppliers have also played an important role in theseachievements.

On behalf of the entire management team, I would like tothank the shareholders for their trusted supportthroughout another year.

United we will go far.

António Nunes

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Summaryof Activity

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Annual Report 2015

Main Indicators

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30%

Income 2015

4,329.3Million Akz

+151%Growth in income from non-shareholder customers

EBITDA 2015

Million Akz

1,311.4

Million Akz / HR

Value of Contracts

7,166Value of contracts signed in 2015

+ 230%compared with 2014

+82%new service provision contracts compared with 2014

87Total Angola Cables employees at the end of 2015

3,146Hours of Angola Cables staff training in 2015

+9%compared with 2014

EBITDA Margin 2015 Productivityof Human Talent

49.825%Asset Turnover

Sales / No. HR

Sales / Total Assets

85%

Return on WACS Investment

Sales / Investment (WACS+CLS+NAP)

Availability

+ 65%compared with 2014

Human Talent

+21 p.p.compared with 2014


+9 p.p. compared with 2014

Million Akz


+52% compared with 2014

of telecommunications systems

99.96% IP99.92% Backhaul

89.36% WACS

Annual Report 2015

Results in 2015

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2015 ∆ 2015-2014 2014 ∆ 2014-2013 2013

Operating revenues (million Akz) 4,329 65% 2,623 36% 1,925

EBITDA (million Akz) 1,311 439% 243 558% -44

Net income for the year (million Akz) 551 280% -196 56% -450

Assets (million Akz) 17,169 3% 16,635 38% 12,052

Equity (million Akz) 11,624 5% 11,063 47% 7,519

EBITDA Margin 30% +21 p.p. 9% +11 p.p. -2%

Financial Autonomy (Total Equity/Assets) 68% 1 p.p. 67% 5 p.p. 62%Immediate Liquidity (Cash and cash equivalents/Current Liabilities) 1.6 -0.1 p.p. 1.9 0.9 p.p. 1.0

Value of Contracts Signed During the Year (million Akz) 7,166 230% 2,172 40% 1,556

Number of Contracts Signed During the Year 82 82% 45 45% 31

Lead to contract ratio 71% 444% 13% +5 p.p. 8%

Total number of employees 87 9% 80 29% 62

Number of hours of training 3,146 123% 1,411 47% 963

IP Traffic (peak) (Mbps) 6,176 1151% 491 -55% 1,100

WACS System Availability 89.36% -10.34 p.p. 99.70% -0.1 p.p. 99.8%

Backhaul Availability 99.92% 0.82 p.p. 99.10% 0.4 p.p. 98.7%

IP System Availability 99.96% 0.16 p.p. 99.80% 0,8 p.p 99.0%

Annual Report 2015

10

Angola Cables and the Prefectureof Fortaleza sign a cooperation agreement that includes the concession of land for the construction of the data centre.

Unveiling of new facilities in the Dolce Vita Condominium

Award for Best Participation in Telecommunicationsat EXPOTIC

Workshop by Afrinic to train national ISPs at Angola Cables facilities

Completion of work in Sangano for the installationof WACS Upgrade #1

equipment

Entry into serviceof Angonix and additionof 11 Members.

Installation of PoPin Cape Verde

1st national Angonix promotionevent

The boat sponsoredby Angola Cables winsthe annual Refeno international regatta, between Recifeand Fernando de Noronha

Completion of the first WACS upgrade, quadrupling Angola Cables's rights and capacity

Installation of Lisbon PoP

Participation in AfricaCom, Africa's largest telecommunications event

Results in 2015

Annual Report 2015

Outlook 2016

BUSINESS GROWTHThe company's business growth is geared towardsinternational development. In 2016, however, thedomestic market will continue to be extremelyimportant to the company's sustainability, particularlywith respect to IP transit. It is envisaged, however,that from 2017 onwards growth will be largely linkedto the international market. In 2016, one of thecompany's primary objectives will be to increase ourpresence in the African market. The establishment ofpoints of presence (PoP) for enhancing internationalsales capacity is therefore fundamental to our growthstrategy.

The company will continue to focus its resources ondeveloping four main areas: geographicaldiversification; expanding the customer base;diversifying revenue streams; and investing insubmarine cables and support infrastructures.

DIVERSIFICATION OF MARKETS

In order to reduce exposure to the Angolan market and align geographical positioning with current investments, Angola Cables is preparing to:

• Expand into the SADC market

• Offering capacity in other WACS stations.

• Creating PoP in South Africa.

• Developing the AfricanTelecommunications Hub programme,including the establishment of theconnection backbone to the Indian coastand the African PoPs network, as well asthe expansion of AngoNAP II.

• Prepare a connection to the Asiancontinent.

• Enter the Brazilian market

• Making the subsidiary Angola Cables Brasiloperational, implementing the strategy forentering the market in 2017, and marketingMonet capacity and the Fortaleza datacentre.

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• Developing relationships with the Prefecture ofFortaleza and the state authorities within thecontext of the established cooperation protocol,thereby reducing entry barriers.

• Promoting the Fortaleza data centre as the digitalcontent centre of the Ceará region, attractingBrazilian content providers for regional andinternational distribution (coverage of the majorPortuguese-speaking market via SACS and WACS).

EXPANSION OF THE CUSTOMER BASE

The current Angola Cables customer portfolio is largelymade up of domestic customers, while the totalnumber of customers remains modest.

Acquiring customers is crucial, both in terms ofincreasing the total number and diversifying theirorigin, thereby reducing exposure to country risk andthe risk of reduced income from the main customers.

The customer portfolio will be much more diverse andbalanced with entry into the Brazilian market. With theentry into service of SACS, in the medium term theAfrican market should make up the bulk of thecustomer portfolio, though there is already untappedpotential with respect to WACS.

The development of sales capacity outside thedomestic market is a priority for 2016.

Annual Report 2015

DIVERSIFICATION OF REVENUE STREAMS

This includes the development of new business, takingadvantage of synergies throughout the value chainand creating additional revenue to that generatedby the main business (circuit wholesaler):

• IP Transit

• Expansion of the PoP network andoptimisation of peering relationships in orderto improve service quality, create IP severity,and consolidate regional hub status.

• Development of AngoNIX and increasedinternational exposure as one of the threelargest African IXPs.

• Attraction of root servers and CDN anchors toimprove the competitiveness of the offer.

• Consolidation of the status of main IP Transitprovider in the domestic market andacquisition of international customers.

• Data Centre

• Preparing the Fortaleza data centre foroperation from 2017, exploring competitiveadvantages and the privileged position forhosting Lusophone digital content with exportpotential.

• Expansion of current capacity in the domesticmarket with the AngoNAP II project, astructural component of the strategy to createan African telecommunications hub in Angola.

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INVESTMENT IN INFRASTRUCTURES THAT WILL SUSTAIN BUSINESS GROWTH

• Monet

• This infrastructure will allow entry into theBrazilian market and, generally, the North andSouth American markets. Monet now has highvisibility in the international capacitywholesale market and has generatedexpectation among market players withrespect to structural impact. Throughout 2016,Angola Cables will implement its entry strategyas it trains its commercial and operationalteams in Brazil.

• SACS

• The conclusion of the financing agreementwith the bank allowed the project to get underway at the end of the 1st quarter of 2016 andit is envisaged that the cable will enter intoservice at the end of the 2nd quarter of 2018.It will be the first submarine cable to beconstructed under the sole responsibility ofAngola Cables (without partners), which willpresent the company with new challenges.

• Cable Landing Stations & Data Center in Fortaleza

• Construction of the Monet CLS for installingthe cable's electrical feed and opticaltransmission equipment at the end of 2016.

• Construction of the SACS CLS and theoperational centre, including the NOCmanaged by Angola Cables.

• Construction of the Fortaleza data centre,capitalising on synergies with the operation ofthe SACS and Monet submarine cables andother competitive advantages. Data centre inthe technological park.

Outlook 2016

Annual Report 2015

• PoP Network

• Completion of the European PoP network(Lisbon, London, Madrid, Marseille, andFrankfurt), with the aim of improving thequality of the IP Transit offer, directed towardsthe specific demand of target markets andsupporting a new offer of connectivity basedon MPLS.

• Development of the African PoP network, withthe installation of the Cape Verde (2015) andJohannesburg (2016) PoPs and other PoPssupported by the connection backbone to theIndian coast, in order to explore thecompetitive advantages of SACS andconsolidate an African telecommunications hubin Angola.

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EFFICIENCY GAINSTo be competitive, Angola Cables must continuallystrive to improve its performance. It is, therefore,necessary to enhance efficiency gains on variouslevels, namely:

• Better organisation and commercial activityprocesses for addressing the African market andincreasing the productivity of the sales force andthe efficiency of collections.

• Better organisation and technical activity processesto increase the quality and efficiency of services.

• Better skills and main company processes toincrease operational profitability.

RISKSAt the close of 2015, Angola Cables faced three risksthat could have a significant impact on results in 2016:

• Macroeconomic risk associated with uncertaintysurrounding the forecasts for the Angolaneconomy, in particular GDP growth, exchange ratefluctuations, payments in foreign currency, andinflation control.

• Market risk, associated with deceleration in growthand the increased difficulty of collection in thedomestic market due to the macroeconomicsituation, as well as the ability to penetrate theinternational market.

• Financing risks relating to a delay in bank financingfor the Monet project and the Fortalezaoperational base, which may incur surcharges andpenalties that are unaccounted for in the financialprojections of the business plan.

Outlook 2016

Angola Cables

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Annual Report 2015

Company history

Angola Cables was established in 2009 by the fivemain telecommunications operators in Angola. Itshistory is closely linked to Angola's need for anactive, well-structured telecommunications sectorwith a government plan for creating an independententity that is kept equidistant from the mainparticipating national operators through arepresentative shareholder structure that ensuresefficient international access for the market.

The plan of the Angolan government for thetelecommunications market will only be successfulthrough cooperation and robust partnershipsbetween the various players in the sector, whetherpublic or private, in order to ensure that a diverseservice offer is provided to end users. Theoverarching objective is to ensure widespreadInternet access with quality services and reasonableprices, transforming ICT into a driver of socio-economic development in the country.

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The first challenge for Angola Cables was toeffectively manage participation in the WACS (WestAfrica Cable System) submarine infrastructure,which was the largest and most developed Africansubmarine infrastructure at the time of itsestablishment, and commercially exploit this asset inorder to generate added value for the sector. Thecommercial launch of the business was marked bythe completion of the Sangano station, where thecable is landed, and Angonap, which is thecompany's connection point with all the marketplayers that use its services.

Though a young company, Angola Cables needed togrow quickly and effectively in order to meet thechallenges of one of the most dynamic andcompetitive sectors in the world.

2009 2012

Launch of the SACS project

Backbone Installation

Inauguration of WACS, Angonap, and Sangano

2014

Preparation of the WACS system upgrade

Launch of the Monet project

ADC Data Centre Viability Study

Quality and EfficiencyAward

2013

Cape to Rio Regatta

Angola Cables Team Building

Agreement withEpsilon

2010 2011 2015

Completion of WACS Upgrade #1

Angonap constructionbegins

Definition of the backbonelink between Sangano and Angonap

Entry into service of Angonix

Construction begins on the Sangano submarine station

Participation in the WACS consortium

Annual Report 2015

Company history

VISION, MISSION AND VALUES

VISION

The vision of Angola Cables is to make Angola one ofthe main telecommunications hubs in Africa.

MISSION

Angola Cables's mission is to ensure that Angola isconnected to the rest of the world and to foster thedevelopment of the telecommunications sector inAngola and Africa by providing high-quality, efficientinternational connectivity to national andinternational operators.

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CORPORATE VALUES

Quality is a crucial factor in the sustained growth ofAngola Cables, ensuring competitiveness andcustomer loyalty. This is fundamental to maintainingthe global reputation of Angola Cables as abenchmark telecommunications operator. Thequality of the products and services sold and thework carried out on a daily basis by the company'semployees are both crucial to success.

Angola Cables invests in knowledge in order tomake good use of its resources and provide a betterservice to its customers. This is one of the company'smain focuses, with skill level and diversity being theprimary intangible asset for thriving in an intenselycompetitive and ever-changing market.

Transparency is a core value that enables AngolaCables to demonstrate its credibility and gain thetrust of the community. Transparency in themanagement of the business is particularly importantin terms of the position occupied by the company inthe national market.

Efficient management of material and humanresources is one of the pillars of the organisation'smanagement. This value naturally applies tooperational management but also to all thecompany's other activities and to all levels of theorganisation. For Angola Cables, efficiency is one ofthe main means of gaining a competitive advantage.

Annual Report 2015


SHAREHOLDER STRUCTURE

Angola Cables was established by the five main nationaltelecommunications operators, which make up thecurrent shareholder structure. The company's majorityshareholder is Angola Telecom (51%). The remainingshareholders are the mobile operator Unitel (31%), thefixed operator MSTelcom (9%), the mobile operatorMovicel (6%), and the fixed operator Startel (3%).

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Movicel has been in the market since 2003 and providesmobile telecommunications services to more than 3 millioncustomers.

MSTelcom is a subsidiary of Sonangol Group and, since 2003,has been a fixed telecommunications service operator.

Startel has been a fixed telecommunications operator since2009 and its chief aim is "to be the customer's preferredchoice" by providing high-quality integrated solutions.

A mobile telecommunications service provider, Unitel hasbeen present in the market since 2001 and has more than 10million customers, offering cover in all the country'smunicipalities.

Angola Telecom is a public company aimed at offering accessto telecommunications services throughout the country,demonstrating a strong commitment to social responsibility.

Angola Cables Shareholder Structure

In 2015, the corporate bodies elected in July 2012 forthe four-year period 2012-2015 completed their finalyear, with the changes reported in 2013 relating largelyto the presiding board members of the shareholders'meeting.

GENERAL MEETING

The Angola Cables General Meeting represents theshareholders and deliberates on matters provided forin the company's by-laws, as well as on all other issuesthat are not the responsibility of other companybodies. The General Meeting Board conducts theMeeting and comprises the Chairman, a Vice-Chairman,and a Secretary.

SUPERVISORY BOARD

The Supervisory Board monitors the fiduciary responsibilities of the executive bodies and is formed of two members and two alternative members.

Composition of the General Meeting Board

Eng. João Adolfo MartinsPresident Angola

Telecom

Engº José HenriquesVice-President Movicel

Dra. Tidiane dos Santos Secretary Unitel

Composition of the Supervisory Board

Dr. João Salvador President MS Telcom

Dr. João Ebo Voting Member

Movicel

Dr. Diamantino Carvalho Substitute Member

Startel

Dra. Yolanda Guerreiro Substitute Member

Unitel

Board of Directors

General Meeting

Supervisory Board

Executive Committee

Statutory Boards

51%

31%

9%

6%3%

Angola Telecom Unitel MSTelcom Movicel Startel

Annual Report 2015


EXECUTIVE COMMITTEE

The Executive Committee is responsible for theday-to-day running of the company, providingregular and consistent feedback to the Board ofDirectors on business developments and thecompany's activities. It also submits proposals tothe Board of Directors which create value for thecompany.

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BOARD OF DIRECTORS

The Board of Directors is made up of shareholderrepresentatives and its functions are to providerepresentation, define strategy, and manage thecompany in accordance with the powers bestowedupon it by the General Meeting.

Pedro Manuel

Director

Responsible for Technical Direction andthe Legal Department. Graduated in Lawfrom the Law Faculty of the AgostinhoNeto University in 2007, specialising inLegal-Economic Sciences.

António Nunes

Chairman of the Executive

Committee

Responsible for Commercial Direction andMarketing, the Human Talent Department,and the Planning and ReportingDepartment. Graduated inElectrotechnical Eng. from the DresdenUniversity of Technology in Germany in1992.

Laura Carneiro

Director

Responsible for Administration andFinance. Graduated in FinancialManagement from the Catholic Universityof Angola in 2007.

Angola Cables Executive Committee

Composition of the Board of Directors

Dra. Naiole Cristina Cohen dos Santos Guedes President Angola

Telecom

Eng. António José Nunes Vice-President Unitel

Dr. Pedro José Manuel Member Angola Telecom

Dr. João Filipe Melão Dias Member Unitel

Eng. Roger Alexandre Ferreira Member MS Telcom

Dr. Paulo Jorge dos Santos Abreu Member Movicel

Dra. Laura Tchinizolle Ferreira Carneiro Member Startel

Annual Report 2015

Business

POSITIONINGThe original positioning of Angola Cables in theinformation and communications technologiesvalue chain was as an international transmissioncapacity provider (wholesale operator). From thisbasis, the company exploits its WACS capacity andinvests in the expansion of its internationalnetwork, namely through the new SACS and Monetsubmarine cables.

The intense competition within its principalbusiness and the potential of its assets obligeAngola Cables to actively seek out diversificationopportunities that have strong synergies with thetraditional business.

In this way, Angola Cables has grown along thevalue chain, assuming the position ofaggregator/distributor of IP traffic, which hasbecome a principal electronic communicationstechnology.

Similarly, exploring synergies, the companyoperates data centres in Angola with the Angonapand Sangano technical centres and, from 2017, inBrazil, as the operator of the largest data centre inFortaleza.

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The complementary roles of IP Transit operator anddata centre operator, as well as the natural positionof wholesale operator, equidistant from the retailoperators, has allowed the company to assumeresponsibility for connecting the internet operators inAngola through AngoNIX, the Angolan IXP with thegreatest international presence.

In 2015, Angola Cables focused

mainly on growing its principal

business by exploiting the WACS

submarine cable, undertaking

construction projects for new

assets (SACS, Monet, and the

Fortaleza operational base),

developing the IP Transit service,

and promoting AngoNIX.

Transmission

Capacity

Providers

Communication

AggregatorsVirtual

Operators

Integrated

Operators

Manufacturerof Hardware

and Software

SystemIntegrators

ApplicationProducts

ContentProducers

CommunicationsOperators

Data Center

Services

Value Added

Services

ICT Value Chain

• Operators of submarine cables

• Wholesale capacity operators

• Colocation

• Hosting

• Managed services

• Cloud computing

• IP Transit Operators

• Carriers• IXPs

Annual Report 2015

SERVICE OFFERAngola Cables's main business consists in thewholesale of large blocks of internationaltransmission capacity (multiple 155 Mbps circuits),which is used by telecommunications operators(retailers) to carry the voice and data trafficgenerated or received within their networks.

Angola Cables currently markets circuit servicesbased on the capacity stock held by the WACS(West Africa Cable System), a submarine cable thatconsists of a fibre optic system that runs betweenSouth Africa and the United Kingdom, withconnections at various points along the west coastof Africa. In the near future, the company will alsosell capacity held in two new submarine cables –Monet (2017) and SACS (2018).

Optical fibre technology (fibre optics) is moreefficient at transmitting large volumes ofinformation over long distances. The technology hasevolved in recent years, allowing an ever greatervolume of information per unit of time along thesame physical medium. This technological advancemeans the capacity of recent submarine cables isvirtually infinite, which along with the long lifespanof submarine cables (25 years), means investmentin these assets translates to extremely attractiveprofitability in the medium and long term.

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The new SACS and Monet cables are equipped withthe latest generation technology.

The international transmission capacity serviceconsists in offering, to domestic and internationaloperators, high-speed circuits between two WACScable landing stations, frequently terminating atone or two ends with access circuits for customerinstallations, which are leased to local operators. Inthis way, the company offers its customers a high-quality, end-to-end service, largely using its ownresources but having the capacity to integrate otheroperators.

The company also offers infrastructure and servicesto the other members of the WACS consortium,allowing them to terminate their circuits at theSangano station or at the peering hub with otheroperators and customers in Luanda (AngoNAP).

By integrating itself along the value chain andcapitalising on the strong synergies with theinternational circuit business, Angola Cables is ableto offer an IP Transit service directed mainly atInternet Service Providers(ISP), corporate groupswith internal communication networks that use IPtechnology, and retail operators with lowervolumes of traffic.

The IP Transit services allow nationaloperators and ISPs to exchange domesticinternet traffic and interconnect with Tier-I/IIISPs, improving quality and providing moreefficient access to international content.

IP TRANSIT

The circuits enable large volumes of data tobe relayed, at the speed of light, betweentwo points along the WACS fibre opticsystem (submarine cable).

CIRCUITS

VALUE

The data centre services consist in thehosting of ICT and digital content equipment(Colocation), the connection of customers(Cross-Connect), and the provision ofassociated operation and maintenanceservices.

DATA CENTER

Business

Annual Report 2015

Business

Thanks to the array of interconnection agreements(peering) with Tier I and Tier II ISPs established byAngola Cables and the quality of its internationaltransmission circuits, the IP Transit service allowsAngola Cables customers high-quality, flexible accessto the largest digital content providers in the world.

This Angola Cables service is key to providingwidespread Internet access in Angola, one of thechief objectives of the Angolan Government'sstrategy in the area of information andcommunication technologies.

In this regard, Angola Cables developed AngoNIX(Angolan Internet Exchange Point), a peering hub fordomestic Internet traffic exchange between nationalISP networks, which is a huge advantage fordomestic Internet users due to the substantialimprovement in quality and efficiency compared withprevious connections abroad.

By making use of the technology installed withinAngoNIX and the skills developed with the AngolanIXP, Angola Cables is preparing to expand its IPservice offer to neighbouring countries, using thecompetitive advantage offered by its submarinecable infrastructure and economy of scale to create abenchmark IXP in the SADC region.

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Exploiting the strong synergies with its technologicalinfrastructure, Angola Cables also offers data centreservices. This currently consists in hosting ICTequipment (colocation), with or without the lease ofequipment, interconnection services (Cross-Connect), and operation and maintenance services.

This offer is aimed mainly at domestic and foreignproducers/distributors of digital content.

By hosting digital content storage and transmissionequipment at its operational centres, Angola Cablesis exploring synergies with its two other lines ofbusiness, circuits and IP, while also developing a thirdfacet of its business that has great and intrinsic valuepotential.

Annual Report 2015

Strategy

STRATEGIC OBJECTIVESAngola Cables's strategy is aimed at maximising the valuecreated by the intensive exploitation of its assets in orderto remunerate shareholders at the level of the bestpractices of comparable companies.

In addition, the company aims to fulfil its mission ofproviding international transmission capacity to players inthe Angolan telecommunications market, thereby makingan important contribution towards boosting and growingthe market, increasing Internet access among theAngolan population, and supporting the developmentplan for the sector led by the Angolan Government, andtherefore the socio-economic development of thecountry.

Lastly, Angola Cables aims to realise its vision of anAfrican telecommunications hubhub based in Angola,improving skills and other national assets and projecting aglobal image of an enterprising nation.

VALUE CREATIONAngola Cables creates value for its shareholders in twoways. Firstly, the business generates sustainableoperating income, which increases the intrinsic value ofthe company and may be partially distributed amongshareholders in the form of dividends following the initialheavy investment phase. Secondly, since theshareholders are domestic telecommunications operatorsthat use the company's services, the substantialreduction in the price of these services in the domesticmarket as a result of the company's activities hasallowed, and will continue to allow, domestic operatorsto make profits equivalent to the savings made byacquiring the services. The economies of scale resultingfrom the sale of services outside Angola and thenecessary improvements in service quality for competingin the international market benefit all domesticcustomers, especially shareholders, which are majorcustomers.

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n In three years of operations, the company has soldWACS cable capacity equivalent to 85% of the initialinvestment in the cable and additional infrastructures(Sangano station, AngoNAP, and backhaul). Since thecable has an expected useful life of 25 years, thisexample illustrates the potential returns oninvestment.

An identical return is expected on the company's newstrategic investments - the SACS and Monet cables.What is more, since these investments are largelyfinanced by banks, thanks to the sovereign guarantee,the potential returns for shareholders could be higher.

Up until the second half of 2017, Angola Cables's mainoperating asset will continue to be its stock of capacityin the WACS submarine cable. The increase in capacityachieved in the fourth quarter of 2015 will fuel thecontinued growth of the company and the increasedprofitability of the asset.

The wholesale international capacity market is fiercelycompetitive. However, thanks to its positioning in thedomestic market, the constant search for efficiencygains, and the specialisation of the sales force andother distribution channels, Angola Cables hasmanaged to increase its international market sharewithout sacrificing commercial margin. Scale andspecialisation are the sources of value creation thatthe company seeks to develop.

In the current phase of the company, with only threeyears of activity and a bold development plan, valuecreation should not be at the expense of preservingexisting assets and avoiding the vicissitudes inherent inrapid growth. During this phase, risk management is acentral focus in the organisation's activities.

Annual Report 2015

Strategy

GROWTHThe telecommunications business in general, andparticularly the wholesale capacity operator business,are economy of scale businesses, meaning AngolaCables needs to grow to remain competitive in theinternational market.

From early 2017, the new SACS and Monet submarinecables will allow Angola Cables to leap in scale, whichwill reinforce the profitability of its operations, notjust by increasing its stock of capacity but, above all,by providing complementarity between the threeassets (including WACS). This perfect combination ofassets will allow entry into new markets, boost thepursuit of greater value, and diversify risks andsources of income.

The SACS and Monet projects are, therefore, ofparticular strategic importance in the short andmedium term due to their impact on the business planand because they require the development ofstrategies for entering new markets.

The simultaneity of projects, financial outlay, specificnature of the technology, entry barriers to newmarkets, and the lack of high-level skills inherent in ayoung company mean that the challenge faced byAngola Cables is exceptionally tough.

This requires the company to concentrate on essentialareas and the rigorous management of projects, andthe shareholders to maintain a stable fundingframework.

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BUSINESS SUSTAINABILITYHowever, the company cannot merely grow bytransforming capital into assets. The business thatAngola Cables has been developing must continue togrow organically outside the creation cycle of largeinfrastructures and provide shareholders and otherstakeholderswith a good return on their investments.

Angola Cables bases its sustainability strategy on fourmain pillars.

Firstly, the diversification of revenue streams.Diversification of the offer, capitalising on thesynergies provided by technological and intangibleassets in order to integrate into the industry valuechain (IP, IXP, Data Centre). Expansion of the customerbase, reducing the influence of national operators.Geographical diversification to reduce market risksand serve global customers. The new SACS and Monetcables will provide Angola Cables with a competitivefoothold in Brazil, a pivotal point for accessing theNorth and South American markets and adifferentiating factor of the African hub.

Secondly, efficiency gains. Increased efficiencythrough the acquisition, retention, and developmentof critical skills. Quality service based on a balancebetween competitiveness and profitability,maintaining a sound reputation and widespreadrenown. Improvement of the supply chain, inparticular suppliers of dark fibre and access circuits forLast Mile customers in each market.

Thirdly, consolidating trust among customers,partners, and suppliers, minimising purchase andtransaction costs, and fostering new businessopportunities.

Finally, innovation. Although very young, the companyhas been an innovator, especially in the domesticmarket (offer, quality of service, commercialrelationship). The ability to anticipate change, toadapt, innovate, and evolve, within an ever-changingenvironment, will be essential attributes for AngolaCables in meeting its strategic objectives.

25

Context

27

Annual Report 2015

Macroeconomic

AFRICAGross Domestic Product (GDP) in Africa should grow by4.5% in 2015 and 5% in 2016, following a more modestperiod of growth in 2013 (3.5%) and 2014 (3.9%), duringwhich several countries faced a variety of difficulties,particularly adjustments forced by the fall in oil prices(Source: African Development Bank/OECD). However,the world economy shows signs of recovery and Africacould soon return to the levels of growth seen beforethe global economic crisis of 2008-2009.

Western Africa achieved growth of 6% in 2014 and 5% in2015, though it has been severely affected by thenegative impact of the Ebola epidemic. Despite the fall inoil prices, in Nigeria, one of Africa's largest oil producers,the economy grew 6.3% in 2015 thanks mainly to non-oilsectors, demonstrating healthy economic diversification.

However, in Southern Africa growth was just 3.1% in2015, checked by the deceleration of the economy inSouth Africa (1.5%).

In several countries, growth was fuelled by increasedinternal consumption and public investment ininfrastructure. However, in 2015 consumption was hit byforeign exchange restrictions and public investment waslargely funded by sovereign debt issuances.

28

Exports suffered due to the slowdown in the globaleconomy and, in particular, the fall in the price of rawmaterials, yet are expected to return to growth in 2016with the global recovery.

Some African countries took advantage of theturnaround in the economic cycle by introducingstructural reforms, especially to make direct foreigninvestment more attractive and reduce red tape costsfor economic activity. Benin, the Ivory Coast, theDemocratic Republic of Congo, Senegal, and Togo areeven among the top ten countries in the world in termsof most reforms made in recent years to stimulateeconomic activity.

Economic Growth in Africa, 2002-2016 (%)Source: Statistics Department, African Development BankNote: (e) estimate; (f) forecast

5,85,3 5,5

5,9 6,1 6,45,5

3,1

5,

3,6

6,5

3,53,9

4,55,

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e)

2015(p)

2016(p)

África Africa Excluding Líbia

2013 2014 (e) 2015 (f) 2016 (f)

Africa 3.5 3.9 4.5 5.0

Central Africa 4.1 5.6 5.5 5.8

East Africa 4.7 7.1 5.6 6.7

North Africa 1.6 1.7 4.5 4.4

Southern

Africa3.6 2.7 3.1 3.5

West Africa 5.7 6.0 5.0 6.1

Economic Growth in Africa by Region, 2013-2016 (%)Source: Statistics Department, African Development BankNote: (e) estimate; (f) forecast

Annual Report 2015

Macroeconomic

In Africa, production continues to be focused mainlyon agriculture, mining industries, construction, and toa substantially lesser degree services andmanufacturing industries. Some countries, however,have invested in the modernisation and structuraltransformation of the economy, encouraging new,more productive activities and diverting resourcesfrom traditional activities towards new sectors, whichthen have a modernising effect on the traditionalsectors.

For countries rich in natural resources, particularly oil,the performance of the European and Chineseeconomies will be crucial to increased exports and thestimulation of growth through fiscal policies. Bycontrast, the low price of oil has provided importingcountries such as Botswana, Mozambique, andRwanda with relief from inflationary pressure andallowed them to introduce more expansionistmonetary policies.

Most African governments have, however, adoptedcautious fiscal policies in order to maintain budgetarydeficits and public debt at sustainable levels, and theeffects on internal consumption are likely to be seenin 2016 for the most part.

The African economy is set to grow

by 5% in 2016, with the gradual

increase in exports driven by the

recovery of the global economy.

The low price of raw materials and

the difficulties involved with

structural reforms and the

diversification of the economy,

within the context of the cautious

fiscal policies adopted by most

countries, translates to a slower

return to the levels of growth seen in

the recent past.

29

ANGOLAThe fall in oil prices is having a negative impact on theeconomy. The Angolan basket is projected to averageUSD 53 a barrel in 2015 (Source: IMF), compared tojust over USD 100 a barrel in 2014, leading to a sharpfall in exports and tax revenue.

The industrial, construction, and service sectors arecontinuing to adjust to the fall in private consumptionand public investment, as well as the ongoingdifficulties in obtaining foreign currency. In 2015,inflation is expected to rise to almost 14%, while thecentral government deficit is set to fall to 3.5% ofGDP, compared to the 6.4% recorded in 2014 (Source:IMF).

In 2016, the economic situation is likely to continuepresenting challenges, since it is not expected to be asignificant recovery in global oil prices. Growth isprojected to remain at a stable 3.5% in 2016, drivenby growth in the oil sector of around 4% and slightlyincreased growth in the non-oil sector of 3.4%.Inflation should slow to 13% at the end of 2016, withthe effect of the recent monetary restrictionestimated to be felt more keenly in the second half of2016.

2009 2010 2011 2012 20132014

(e)

2015

(f)

2016

(f)

Real Economy

(‘000.000 Akz / %)

Gross Domestic

Product (Akz)5,989 7,580 9,780 11,011 11,985 12,713 12,227 14,658

* Oil GDP 2,662 3,396 4,641 5,030 4,864 4,531 3,104 3,994

* Non-Oil GDP 3,327 4,184 5,139 5,982 7,121 8,182 9,123 10,665

Real Domestic

Product

(%)

2.4 3.4 3.9 5.2 6.8 4.8 3.5 3.5

* Oil GDP (%) -5.1 -3.0 -5.4 4.5 -1.1 -2.6 6.8 3.8

* Non-Oil GDP (%)

8.1 7.6 9.5 5.5 10.9 8.2 2.1 3.4

Consumer

Prices

(end of per.)

14.0 15.3 11.4 9.0 7.7 7.5 13.9 13.0

Exchange Rate

(Akz/USD)

Official Rate

(end of period)89.4 92.6 95.3 95.8 97.6 102.9 134.6 …

Oil

(average, USD/barrel)

Price of Angolan

oil60.8 76.5 108.7 110.9 107.3 100.7 53.0 53.0

Price of Brent

oil61.9 79.6 111.0 112.0 108.8 98.9 53.4 53.0

Macroeconomic Indicators, 2013-2016 (%)Sources: Angolan authorities and IMF estimates and forecastsNote: (e) estimate; (f) forecast

Annual Report 2015

Macroeconomic

The expectation of an improved businessenvironment, more flexible exchange rate, and thecompletion of structuring projects, especially withregard to agriculture and infrastructure, raises hopesthat non-oil related GDP growth will graduallyaccelerate in the medium term to 7% by 2020.

Exchange rate stability was a key component ofAngola's disinflation strategy from 2010-14. However,the kwanza has depreciated by almost 30% in the last12 months, since the fall in oil prices has substantiallyreduced the availability of foreign currency in thecountry.

Since September 2014, when the National Bank ofAngola (BNA) changed the nominal exchange rate asan anchor for monetary policy, there has been a risk ofhigher inflation expectations. Even though it hasreduced recently thanks to the gradual de-dollarisation of the economy, between 20112015 inparticular, the transmission of the exchange rate toinflation has also been instrumental. Bearing in mindexpectations (Source: IMF) of a 10%-30%overvaluation of the real effective exchange rate, it islikely that monetary policy is aimed at ensuring thatthe evolution of monetary aggregates remainsconsistent with inflation objectives.

30

BRAZILThe effects of the reduction in external demand, as aconsequence of the slowdown of the more developedeconomies, allied to the impact of severe fiscaldeterioration, led to an economic crisis that has beenexacerbated by a political crisis. The medium-termoutlook is not favourable due to the effects of thesecoinciding economic and political crises. In view of theslow recovery of the developed economies and thisinternal strife, it is likely that economic activity inBrazil will continue to deteriorate in 2016.

The Brazilian GDP could contract by 3% in 2016,following the 3.8% fall in 2015. The reduction ininternal consumption and investment were the mainreasons behind economic recession in 2015. However,the expectation of a more positive trade balanceshould stimulate economic growth from 2016.

The Real (BRL) has depreciated by 38% against theUSD between the 1st quarter of 2015 and 2016, andby 70% since the beginning of 2014. This depreciationtrend is likely to continue in 2016, though at a slowerrate than that witnessed in recent times. Someforecasts point towards a BRL-USD exchange rate ofaround 4.15 at the end of 2016 and 4.20 at the end of2017 (Source: BBVA).

Gross Domestic Product and its components (%)Source: IBGE & BBVA Research

Oil and Non-Oil GDP Growth Rate, 2009-2016 (%)Sources: Angolan authorities and IMF staff estimates and forecasts

-5,1-3,0

-5,4

4,5

-1,1 -2,6

6,8

3,9

8,1 7,69,5

5,5

10,9

8,2

2,1 3,4

2009 2010 2011 2012 2013 2014 (e) 2015 (p) 2016 (p)

Sector Petrolífero Sector Não Petrolífero Taxa de Crescimento Real

-3,8

-13,7

-3,9

-0,4

7,2

-13,6

-3

-12,2

-2,5

-0,1

2,7

-10,2

1,33,2

0,5 0,0

5,1

2,4

PIB FBCF Cons. Privado Cons. Publico Export. Import.

2015 2016 2017

Oil Sector Non-oil Sector Real Growth Rate

GDP GFCF Private Cons. Public Cons. Exports Imports

Annual Report 2015

Macroeconomic

The short and medium-term outlook for the Brazilianeconomy remains influenced by the need for fiscaladjustment and a more restrictive monetary policy inorder to contain inflation, as well as a lack ofconfidence on the part of investors due to thepolitical instability.

Unemployment is set to rise in 2016. Althoughinflationary pressure appears to be under controlafter reaching 10.7% in 2015, the return of inflation toa trend in line with the central bank's objective isfacing the adverse impacts of the sharp depreciationof the real.

31

The prospects of fiscal balance have deteriorated,which has led to a risk of sovereign debt being sub-investment-grade in 2015. As a result, regaining theconfidence of foreign investors has become a priority,despite the added difficulties of fiscal policy withinthe context of a recession. In the medium term, arecovery could be stimulated by successful structuralreforms, including taxation policy and the reductionof trade barriers and red tape costs, although suchreforms require political stability.

2014 2015 2016 (p) 2017 (p)

Gross Domestic Product (% growth) 0.1 -3.8 -3.0 1.3

Inflation (% year-on-year, end of period) 6.4 10.7 6.8 4.5

Exchange Rate (BRL/ USD, end of period) 2.7 3.9 4.1 4.2

SELIC Interest Rate (%, end of period) 11.7 14.3 14.3 11.5

Fiscal Income (% of GDP) -6.1 -10.2 -8.7 -7.6

Current Account (% of GDP) -4.3 -3.4 -2.7 -1.1

Macroeconomic Indicators, 2014-2017Source: BBVA ResearchNote: (f) forecast

Unemployment and Exchange RateSource: OECD (Organisation for Economic Co-operation and Development)

Annual Report 2015


AFRICA

SUBMARINE CABLES

In 2015, the African continent continued to besupplied by 13 submarine cable systems, distributedalong the western and eastern coasts and theMediterranean basin. Since the various cables wereinstalled between 2010-2012, no other system hasentered into service. However, in 2015, WACScapacity was increased for the first time by adopting100 Gbps technology, quadrupling installed capacity.

In 2015, some new projects were announced,demonstrating investor confidence in the potentialgrowth of the market in the medium term. A newtransatlantic cable was announced betweenCameroon and Brazil (CBCS – Cameroon-Brazil CableSystem), which was set to enter into service at theend of 2017, although this date appears to beoverambitious.

32

This cable will offer an alternative to SACS, therebycreating redundancy and adding value to the pioneeringroute across the South Atlantic. As well as SACS andCBCS, there is the much-heralded SAE (South AtlanticExpress), although there has been no news of anydevelopments in the past year.

The ACE announced the launch of the São Tomé andPríncipe – South Africa segment, although there is littlepublicly available information about the project. A newcable will connect Cameroon and Nigeria (NCSCS –Nigeria-Cameroon Submarine Cable System).

On the east coast, the Gulf2Africa (G2A) cable wasannounced, which will connect Oman and Somalia fromthe end of 2016.

LAND-BASED NETWORKS

Access to submarine cable capacity by inland areascontinues to be the sector's main challenge. Africanoperators have invested heavily in the installation ofterrestrial fibre optics, yet the wholesale offer of land-based transmission capacity is still either non-existentor extremely insufficient in large swathes of thecontinent.

Atlas

Offshore320 Gbps

I-ME-WE3840 Gbps

GLO-12500 Gbps

ACE5120 Gbps

SEACOM1280 Gbps

WACS14.5 Tbps

TEAMS1280 Gbps

MaIN OnE10 Tbps

Palmarejo, Cape Verde

Canary Islands, Spain

EASSy10 TbpsSEA-ME-

WE41280 Gbps

Active submarine cables on the African continentSource: Submarine Telecoms Industry Report 2015 &

Telegeography’s Submarine Cable Map

Sat-3/SAFE800 Gbps

LION1300 Gbps

EIG3840 Gbps

SAS-1

1280 Gbps

SEAS320 Gbps

Lion21280 Gbps

Submarine Cables in Africa

Annual Report 2015


It is the mobile operators that have invested most inexpanding the capillary of land-based networks,though exclusively for their own use in the majorityof cases. However, some governments have investedin the establishment of national fibre optic rings andmetropolitan networks, which wholesale operatorscomplement with their own infrastructures to createmultinational networks and connect to submarinecable landing stations.

Several countries, namely South Africa, Nigeria,Senegal, Ghana, Kenya, and Tanzania, already haveextensive fibre optic networks, yet coverage in theinterior of the content remains extremely limited.

The World Bank is providing financial support forinitiatives by African nations aimed at improvingnational telecommunications networks. This fundingis through two main ongoing programmes – the WestAfrica Region Communications Infrastructure Project(WARCIP) and the Central African Backbone (CAB),aimed at developing regional and internationalconnections and, ultimately, interconnecting all thedomestic networks in the region. The WARCIPprogramme spans nine countries in the EconomicCommunity Of West African States (ECOWAS) andmainly provides funds for connecting these countriesto the ACE submarine cable. The CAB programme isfocused on two main areas: the connection fromChad and the Central African Republic to the ACElanding station in Cameroon, and the interconnectionof the Gabon and Democtratic Republic of Congodomestic networks.

33

EVOLUTION OF DEMAND

Demand for international transmission capacity fromAfrican countries increased fivefold between 2010-2014, to a volume of 2.4 Tbps. More than half thisdemand originates from just three countries:Morocco, Egypt, and South Africa.

There was a more substantial increase in demand inthe countries that have recently invested indeveloping their communications infrastructure. Inthe two countries where all five west coastsubmarine cables land, Ghana and Nigeria, averageannual growth between 2010-2014 was 114% and87% respectively. On the east coast, Tanzania andMozambique, which provide neighbouring inlandcountries with access to the EASSy and SEACOMcables, average annual growth during the sameperiod was 122% and 127% respectively. In Uganda,which has no direct access to the submarine cablesbut whose government and wholesale operatorshave invested in fibre optics, the average annualgrowth in capacity demand stands at 83% since 2010.

International capacity used by African countries, 2010-2014

(Mbps)

2010 2011 2012 2013 2014 CAGR

Algeria 40 352 51 823 75 573 116 200 157 177 40%

Angola 1 232 2 126 6 327 21 995 29 921 122%

Benin 998 1 309 1 839 2 298 3 490 37%

Botswana 1 048 2 327 3 186 6 123 13 375 89%

Burkina Faso 849 1 202 1 638 2 325 3 346 41%

Cameroon 978 1 913 5 378 8 139 17 061 104%

Ivory Coast 4 471 6 803 8 901 16 159 21 571 48%

Djibouti 2 308 8 894 16 756 43 723 49 746 115%

Egypt 155 800 196 674 270 035 351 588 501 972 34%

Ethiopia 3 600 4 660 6 445 9 185 14 112 41%

Ghana 3 375 5 733 15 306 33 527 70 732 114%

Kenya 10 184 19 368 31 866 117 348 137 553 92%

Libya 3 434 5 382 8 211 12 029 15 892 47%

Mauritius 3 583 7 148 16 103 21 776 33 472 75%

Morocco 91 704 120 015 156 340 316 647 507 079 53%

Mozambique 1 222 2 179 3 651 29 484 32 395 127%

Namibia 2 377 3 918 6 412 12 274 14 554 57%

Nigeria 15 757 34 935 64 059 124 795 191 314 87%

Senegal 6 487 8 912 12 248 19 196 31 213 48%

South Africa 47 556 63 271 114 825 229 065 341 523 64%

Sudan 7 742 14 737 25 718 65 584 99 876 90%

Tanzania 2 985 5 871 10 551 55 173 72 888 122%

Tunisia 42 725 68 583 95 811 102 988 134 515 33%

Uganda 2 360 4 164 6 527 21 603 26 541 83%

Source: TeleGeography

Annual Report 2015


More than 85% of international communications trafficoriginating in Africa is destined for Europe. Although thispercentage has fallen over the last four years due to theincrease in intra-African traffic (12%), Europe will continueto have the natural monopoly on internet provision toAfrica, at least until an alternative route is opened in theSouth Atlantic (SACS) to provide low latency access to ISPsin the United States.

The Internet is the major source of growth in Africantransmission capacity demand, as is the case in the rest ofthe world. The construction of fibre optic networks in themain African cities and the expansion of mobilecommunications networks, in particular the installation of4G (LTE) technologies, are the defining factors in thegrowth of capacity demand.

At the end of 2015, 50 African mobile operators alreadyhad functioning LTE networks. Operator investment inmobile broadband, the profusion of cheap smartphones(less than US$50), and the rise in digital literacy will meana growth in the number of mobile broadband (3G and 4G)users in Africa from 222 million at the end of 2015 to 1billion in 2020 – corresponding to a growth in broadbandpenetration from 23% to 76% among mobilecommunications users (source: Ovum).

ANGOLA

SUBMARINE CABLES

In 2015, the most significant fact regarding transmissioncapacity via Angolan submarine cables was the increase inWACS capacity, which quadrupled.

During the cut in the Sangano segment of the cable, aportion of WACS traffic was restored by SAT-3, via theCacuaco station and interconnection with WACS in SouthAfrica. This unfortunate event demonstrated theimportance of mutual restoration capacity between thetwo submarine cables and the need for permanentlyavailable transmission means and operational agreementsthat, in the event of an interruption to one of the cables,allow the rapid restoration of international traffic fromAngola via the other cable.

34

SACS, which is set to begin construction in the firstquarter of 2016 and enter into service in the firstquarter of 2018, will open up the African continent, viaAngola, to a pioneering transatlantic route in thesouthern hemisphere, providing a direct link with Braziland, through the Monet cable, the United States. SACSwill interconnect with WACS at the Sangano stationand with Monet at the Fortaleza station, both of whichbelong to Angola Cables.

SACS will offer sub-Saharan African countries, whichinclude seven of the ten largest telecommunicationsmarkets in Africa, the fastest connection to NorthAmerican ISPs.

In September 2015, the award of the SOOC (SonangolOffshore Optical Cable) project to Alcatel-LucentSubmarine Networks was announced. However, theproject was placed on standby due to the oil pricecrisis. The SOOC would extend for 1900 km and wouldconnect the offshore oil and gas drilling platforms tofour landing stations along the Angolan coast, at thesame time ensuring a fibre optic link between Cabindaand Luanda.

The new ACE segment between São Tomé and Príncipeand South Africa, whose construction was announcedin 2015, envisages a link to Angola, in the Luandaregion. However, at this time the details of thispossible link are unknown.

Submarine cables landing in Angola

System RFS

Total

length (km)

Total planned

capacity

SAT-3 2002 13,000 340 Gbps

Adones 2009 1,800 80 Gbps

WACS 2012 16,000 5.12 Tbps

SACS 2018 6,165 40 Tbps

Annual Report 2015


BRAZIL

SUBMARINE CABLES

Monet will be the next submarine cable betweenBrazil and the United States (Miami) to enter intoservice, in the first half of 2017, followed by Seabras-1(New York), also in 2017. These two cables willsubstantially increase installed transmission capacitybetween the fourth (Brazil) and first (USA) largesttelecommunications markets in the world. However,the growth potential of this route continues to attractinvestors and a new cable (BRUSA), set to enter intoservice in 2018, was announced by Telefónica's newinfrastructure operator (Telxius).

SACS will open a new route to Africa (and Europe, viaWACS) from 2018. Construction on the CBCS(Cameroon-Brazil Cable System) may be completedthe same year, connecting Brazil (Fortaleza) toCameroon. EulaLink, which aims to link Brazil andPortugal, with a landing point in the Canary Islands,has not yet secured the necessary funding forcommencing the project.

35

EVOLUTION OF DEMAND

Of 20 countries, Angola scores second highest onOvum's Digital Media Opportunity Index for sub-Saharan Africa, behind only South Africa and followedby Kenya, Nigeria, and Ghana. This index combines 50indicators – including connectivity, adoption of digitaldevices, existing availability of content and services,consumer potential, capacity for monetising content,and the cultural development index – to estimate thegrowth potential for the digital content and servicesmarket in each country, including applications, digitalmusic services, digital media, OTT video, and videogames services.

The public and private sectors continue to makestructural investments with the aim of increasing thepopulation's access to telecommunications services.Information technologies are increasingly widespreadand the population has more access to mobilecommunication and Internet services.

Both mobile communications operators launchedcommercial 4G (LTE) services in 2015 and one of themdemonstrated, for the first time in Africa and one ofthe first in the world, the use of LTE-Advanced in acommercial network to reach transmission speeds of450 Mbps. These investments also promote the use offixed broadband due to the paucity of ground-basedinfrastructure.

The introduction of low-priced smartphones onto themarket and the launch of new digital services, such asmusic distribution, are other significant factors inboosting demand, with repercussions on internationaltransmission capacity.

Evolution of the Internet Penetration Rate in Angola 2009-2016Sources: International Telecommunications Union & Internet Live Stats

Report on Angola Internet Users

6,0

10,0

14,816,9

19,121,3

22,5 23,0

2009 2010 2011 2012 2013 2014 2015 2016

Active submarine cables in BrazilSource: Brazilian Ministry of Communications

Annual Report 2015


EVOLUTION OF DEMAND

Latin America, and Brazil in particular, continues to beone of the regions with the highest growth in demandfor international capacity. Between 2010-2014,international transmission capacity grew by 45% peryear on average, a much higher figure than in Europeand North America.

In contrast to the majority of other regions, LatinAmerica in general increased its reliance on theUnited States for international connectivity. In 2014,87% of Latin America's total international capacitywas connected to the USA, while 12% correspondedto intra-regional capacity. This reliance is largelyexplained by the access to US Internet operators,mainly in Miami.

In Brazil, the growth in international Internet traffic isclosely related to the increased demand forbroadband services, driven by regulatory policies thathave attracted domestic and foreign investment,namely for the installation of fibre optics forindividual users (FTTH). In addition, the spectrumreallocation to broadband mobile applications led tothe rapid expansion of 4G (LTE) technologies, to theextent that, by mid-2016, the number of 4G usersshould surpass that of 2G users.

Continuing the trend of the more developed markets,content providers like Google, Microsoft, andFacebook are accounting for an ever greater portionof the demand for capacity in Latin America. Althoughpublic Internet accounted for 83% of internationalcapacity in 2014, private network capacity, includingcontent providers, grew by 55% on average between2010 and 2014.

36

Additionally, in September 2015, the PacificCaribbean Cable System (PCCS) entered into service inLatin America, linking Ecuador and various points inCentral America to the USA. The South AmericanCrossing cable was extended to the Colombian coastin the Pacific Ocean. The South America Pacific Linkwas announced, which will connect Chile and Panamato Hawaii, with an extension (SAPL Caribbean Express)to Florida, and which is scheduled for completion in2017. In November 2015, construction of the Tannatcable between Brazil (Santos) and Uruguay(Maldonado) was also announced, in a partnershipbetween Google and Antel; it will interconnect withMonet in Santos. In March 2016, Google announcedthe Júnior cable, between Rio de Janeiro and Santos,which will interconnect with Monet and Tannat inSantos.

LAND-BASED NETWORKS

Brazil now has a diversified offer of opticaltransmission infrastructure, above all in the maincities. Investment has recently been relocated forcoverage in more inland areas, namely the north andcentral regions, for interconnection with othernational South American networks and theinstallation of 100 Gbps technology in the oldernetworks.

Operators such as Internexa, in South America, andREDCA, in Central America, have been investingheavily in intra-regional networks, connecting tosubmarine cables.

37

Analysisof Activity

39

Annual Report 2015

Relevant Events

RELEVANT EVENTS IN 2015In its third year of operations, Angola Cables focusedmainly on commercial development, infrastructure, andits human resources.

40

The events relating to Angola Cables's activity during2015 are listed below in chronological order.

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

▪ Participation in the PTC'15 conference, in Honolulu, Hawaii

▪ Conclusion of a land concession and cooperation agreement with the Prefecture of Fortaleza for the development of ICT in the region, boosted by the SACS and Monet cables, the data centre, and the Angola Cables operational centre

▪ Partnership with Akamai for providing cache services to Angola Cables's IP Transit customers

▪ Entry into service of AngoNIX, the Angolan and regional IXP

▪ Participation in the LATAM'15 conference, in Rio de Janeiro, Brazil

▪ Approval of the 2014 Report and Accounts at the Ordinary General Meeting

▪ Participation at the IAD Summit, in Zimbabwe ▪ Participation in EastAfrica.com in Nairobi, Kenya

▪ Participation at Expotic, in Luanda▪ Participation in "International Telecoms Week" (ITW), in

Chicago, USA▪ Participation at Globalcom in Luanda, Angola ▪ Annual Management Meeting

▪ Cut in the WACS fibre optic cable at the Sangano segment

▪ Conclusion of the land concession agreement with the Prefecture of Fortaleza for the construction of the SACS landing station and a data centre by Angola Cables

▪ Completion of repairs to the cut in the WACS fibre optic cable and return to normal traffic in the Sangano station segment

▪ Participation at GAMESCOM, one of the largest electronic games events in the world, in Koelnmesse, Germany, with a view to establishing cash partnership with some of these players

▪ Installation of WACS Upgrade #1 equipment in Sangano▪ Participation at the Connect to Connect Summit in

Tanzania▪ Participation in the African Peering and Interconnection

Forum, in Maputo, Mozambique

▪ Participation at the 2015 Capacity Europe event in Paris, France

▪ Participation at AfricaCom, the largest telecommunications event in Africa, in Cape Town, South Africa

▪ Completion of SDH PoP installation in Lisbon ▪ Participation at the DE-CIX Summit, in Frankfurt, Germany and Istanbul, Turkey

▪ In partnership with the Kitabanga Project and aimed at the children of Sangano, funding was provided to paint the primary school and buy toys for the pupils

▪ Celebration of Angola Cables's anniversary

▪ 1st national AngoNIX promotional event▪ Boat sponsored by Angola Cables wins the annual Refeno

international regatta between Recife and Fernando de Noronha (Brazil) ▪ Participation in the Oracle workshop on Cloud Computing

▪ Installation of root replica server (IP)▪ Participation at Futurecom, one of the largest technology

events in Latin America, in São Paulo, Brazil▪ Afrinic Training Workshop for domestic ISPs at Angola

Cables's facilities▪ Presentation of Angola Cables projects at the InfoBrasil

event, in Ceará, Fortaleza

Annual Report 2015

Relevant Events

MONETMONET is a fibre optic submarine cable systembetween the United States and Brazil, which is beingconstructed by Angola Cables in collaboration withGoogle (USA) and two internationaltelecommunications operators, Algar Telecom (Brazil)and Antel (Uruguay).

The submarine cable extends for 10,556 km andterminates at the Boca Raton (USA), Fortaleza andSantos (Brazil) stations. The total transmissioncapacity is 64 Tbps, in 6 fibre optic pairs.

Angola Cables owns two fibre optic pairs, with acapacity of 24 Tbps.

The main Monet system supplier is Tyco ElectronicsSubcom (USA). Construction began on 8 October 2014and the system is expected to enter into service in thesecond quarter of 2017.

In February 2015, the final system design review wascompleted and there was a demonstration of thetechnology's compatibility with the specifications atthe supplier's laboratories.

41

Throughout 2015, various other activities wereperformed, mainly relating to the study on theunderwater cable route, the topographic survey ofthe seabed, authorisation for installing the cable andimporting equipment, the manufacture of the opticalfibre, the cable, and the underwater repeaters, andthe selection of cable landing points and terminationstation locations.

The project will enter some significant phases in 2016,in particular the construction of the Fortaleza andSantos stations, as well as the construction of thebeach manholes and cable ducts leading to thestations, the laying of the cables on the seabed, andthe installation of station equipment.

In addition, in 2016 Angola Cables will hold a tenderfor acquiring the optical transmission equipment to beinstalled in the three stations and extended to SãoPaulo (Santos backhaul).

MONET CLS

Angola Cables will be building the Monet station inFortaleza at a dedicated site close to the land grantedby the Prefecture for constructing the SACS CLS andthe data centre. In 2015, work was carried out withrespect to the selection and acquisition of the land,the topographical survey, the ground study, andconstruction projects for the station, beach manhole(BMH), and the land cable duct (between the BMHand the station).

The BMH and the duct should be completed in July2016 and the station by the end of the year.

Annual Report 2015

Relevant Events

ANGONIXOn 16 March 2015, AngoNIX entered into service. Thispiece of infrastructure is a strategic icon for AngolaCables in terms of its vision of developing the Internetin Angola and its expansion throughout the region.

AngoNIX is an Internet Exchange Point (IXP) betweenInternet Service Providers (ISP) and digital contentproviders in the domestic market. This ensures theimpartial routing of domestic traffic between thevarious players in the domestic digital market.AngoNIX allows domestic IP traffic to be exchangedwithin the country, with huge advantages in terms ofcost and quality of service.

AngoNIX serves as an Internet usage level barometerfor international CDNs. As domestic usage grows,international operators become more interested increating links, which significantly improves localInternet quality. In turn, the presence of internationalCDNs in our network attracts regional operators.

42

AngoNIX also optimises the use of internationaltransmission capacity, reducing costs for its members.

The platform is located in AngoNAP, Angola Cables'sconnection hub and data centre in Luanda.

AngoNIX was developed with technical and operationalcollaboration from De-CIX, the largest European IXP.The technology is robust and scalable, allowing AngolaCables to successfully grow the platform and become aregional benchmark and one of the major African IXPs.

As well as being important to the development of theInternet within the country, AngoNIX is also a structuralcomponent of Angola Cables's strategy to create IPseverity and the African telecommunications hub.

At the end of 2015, after just 9 months of operation,AngoNIX already had 11 active members (ISPs), a trafficpeak of 4.4 Gbps, and average daily traffic of 3.1 Gbps.However, not all Angola Cables shareholders werelinked to the platform.

Official presentationof the project Entry

into service

December 2015Annual objectives exceeded in

terms of number of active members and volume of traffic

Establishment of the AC –De-CIX

partnership(Date)

Annual Report 2015

Relevant Events

WACS CABLE CUTOn 1 June 2015, a fault was detected in the WACScable, with the initial diagnostic indicating a sharpvoltage fluctuation in the Sangano power feedequipment (PFE), from around 132,000 to 42,000volts. Tests confirmed optical continuity between thestation and the first repeater in the S1D segment(Sangano segment), indicating optical fibre integrity.Tests were carried out with support from otherstations and coordination from the WACS system'sprimary NOC (P-NOC), confirming a fault in theelectrical insulation between the Sangano station andthe first repeater.

In order to fix the issue, the P-NOC was requested topower the S1D segment via the Pointe-Noire PFE(Congo), yet this had been out of service for twomonths and the segment in question was powered bythe Yzafontein PFE (South Africa). Yzafontein could notsimultaneously power the Pointe-Noire and Sanganosegments. Faced with a major risk of a cut in traffic,Angola Cables requested that the WACS consortium'sOperation and Maintenance Committee (COM) givepriority to the Sangano segment, considering itsgreater volume of traffic compared with the Pointe-Noire segment. The lack of operational procedures forprioritising Sangano rendered this solution non-viableand the COM quickly arranged for a ship with all thenecessary equipment to go and repair the cable.

43

Angola Cables sourced divers to find the exact locationof the electrical fault and inspect the state of thecable. The conclusion was that the fault layapproximately 2.7 km from the BMH and 5.2 km fromthe Sangano station. The company's engineers playedan active role in the inspection and gathered clearproof (film) of the damage to the cable's protection.The visual inspection indicated the issue stemmedfrom friction between the cable and the rocky seabed,which had damaged the metal sheath and armour.Since it was a shallow area, the repair vessel could notwork alone due to its draught, meaning Angola Cableshad to source an available support vessel in the region.

On 28 June, the cable broke completely, totallydisrupting service. The delay in concluding anagreement with the support vessel “Greta K”, whichwas still carrying out other activities in Pointe-Noire,and obtaining the operating licenses for the two ships,delayed the departure of the repair vessel “CS LeonThevenin”, which finally set off on 10 July.

On 13 July, a restoration solution was implemented bySAT-3 as far as South Africa, where traffic was re-directed back to the WACS. The provisional 10 Gbpsconnection between AngoNAP and the SAT-3 station inCacuaco was provided by UNITEL.

The repair was carried out between 17-23 July usingthe two vessels and a team of divers. The cable wasreplaced at the section damaged by the friction withthe rocks and the original trajectory was altered toreduce the risk of another cut.

This serious incident alerted Angola Cables to the needfor a permanently available restoration solution andregular cable inspections in shallow waters. Theseinspections will demonstrate the usefulness ofreinforcing cable protection by means of articulatedpipes or by fixing the cable to the seabed.

Annual Report 2015

Commercial

MAIN ACHIEVEMENTS

COMMERCIAL OBJECTIVES

In 2015, there was a significant change in theperformance of the Angola Cables commercialdepartment, with marked improvements on previousyears as regards the opportunities identified,proposals developed, and agreements signed.

The total revenue envisaged in the annual budgetwas exceeded by 13%, with the Data Centre serviceworthy of particular mention since it doubled theprevious year's turnover.

Turnover increased 65% on the previous year and thetotal value of agreements concluded in 2015increased by 230% compared with 2014. Turnoverfrom non-shareholder customers increased 151%,which corresponded to 47% of the total turnover forthe year. In 2015, 20% of turnover came from outsidethe domestic market.

In summary, 2015 was a year of major commercialendeavour, which has allowed Angola Cables toestablish a solid customer base and increase its sharein the domestic and international markets.

44

OPTIMISATION OF COMMERCIAL OPERATIONS

As part of the Sales Force Optimisation Programme,an operational plan was implemented to transformthe commercial department, allowing annualobjectives to be met and improving customer service.

Based on four specific areas (Processes, Organisation,Human Resources, and Systems), a series ofinitiatives were implemented, namely marketanalyses, commercial team restructuring, and thedefinition of processes. The overarching objectivewas to systematise operations and boost commercialactivity.

ANGONIX

AngoNIX entered into service in March and, up to theend of the year, the defined objectives wereexceeded, with respect to the number of activemembers in particular.

This service placed Angola Cables among the majorinternational IXPs and is key to the strategy ofcreating a telecommunications hub in Angola.

At the end of 2015, AngoNIX recorded substantialgrowth in the volume of traffic and a rapid trendtowards becoming one of the three largest AfricanIXPs.

Annual Report 2015

Commercial

PRODUCT MANAGEMENT

In the second half of 2015, management of theservice offer was divided by product and the neworganisational structure began operation.

In order to create a complete and structuredoverview of the services offered by Angola Cablesand ensure the internal uniformity of commercialinformation, two groups of documents weredeveloped: background information explaining thecompany's service offer and technical specifications.

The documents describe the services from differentperspectives, including technical characteristics,available capacity, and prices.

POST-SALES

The Post-Sales department was also restructured inthe second half of 2015, focusing its activities on thefour main areas indicated in the diagram below.

45

CUSTOMER SATISFACTION

At the end of the first half of the year a satisfactionsurvey was conducted, with 24 customersresponding. The results were mainly positive,particularly considering it was conducted after theWACS cable cut. Based on the results of the survey,an improvement plan was implemented under thedirection of the post-sales department.

At the end of the year a second survey wasconducted, which received a response from 30customers and showed an increase in overallcustomer satisfaction.

Angonix, IP, and

CDN Management

Content Services

Management

Circuit Services and

Data Centre

Management

Marketing

Main Service Management activities

78%

83%

78%

69%

81%

88%

82%

79%

Financial area

Customer service

Customermanager

Technical area

1st half of 2015 2nd half of 2015

Satisfaction by department

[1st and 2nd survey 2015]

Between the first and second surveys carried outduring the year, overall customer satisfaction withAngola Cables's services rose by almost 4%, whilethere was a significant increase in satisfaction withall the company departments that have contact withcustomers.

Main Post-Sales activities

Overall satisfaction

75%

79%30%

45%

1º Semestre 2015 2º Semestre 2015

Response rate

1st survey

2nd survey

1st half 2015 2nd half 2015

Service Management

Market Analysis Evolutionary Model Service Offer and

Pricing

Communication and

Branding

Performance

Analysis

Sales support and

procurement

Customer relationship

management

Customer service Customer satisfaction

Post-sales

Annual Report 2015

Commercial

COMMERCIAL PERFORMANCE

MAIN ACTIVITY INDICATORS

During 2015, 194 commercial opportunities wereidentified, a 14% increase on 2014.

Of the 194 opportunities identified, 59% related to IPTransit and Circuit services, a total of 115opportunities.

46

54

115

25

194

Circuitos IP Data Center Total

Number of proposals per type of service in 2015

Circuits

Annual Report 2015

Despite the upward trend across all areas of thesales pipeline, the significant increase in thenumber of agreements concluded shows that thelead to contract conversion rate improvedsubstantially, with an average of 2.75 proposalsrequired to conclude an agreement.

Despite the positive results in terms of theagreement conclusion rate in the Data Centre,there continued to be intense competition in theother areas, requiring increased sales efforts.

47

In 2015, 82 new service provision agreementswere established, of which more than 70% wereconcluded with non-shareholder customers. Thisrepresents an 82% increase on the previous year,when 45 agreements were concluded.

The months in which the highest number ofagreements were concluded were February andDecember, with 12 and 11 agreementsrespectively.

These results reflect the performance of the

commercial team in concluding and renewing

agreements and increasing sales volume. This

performance is not only the result of developing

employees' sales skills, but also Angola Cables's

growing visibility and renown, itself a result of the

quality service offer.

Number of contracts signed per service in 2015

328

170

45

246

194

82

Opportunities Proposals Contracts

2014 2015

Number of contracts signed in 2015

712 8 5 9 5

103 4 4 4

11

82

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Sales Pipeline

Lead to contract conversion per service in 2015

54

115

2526 31 25

Circuits IP Transit Data Center

Proposals Contracts

27%48% 100%

+14%

+82%

-25%

2631

25

82

Circuito Trânsito IP Data Center TotalCircuit IP Transit

Circuit

Commercial

Annual Report 2015

Commercial

The total value of sales derived mainly from thecircuits service (77%), followed by the IP Transitservice (22%). The Data Centre service continuesto account for a small percentage of revenue (1%)due to the fact that it is a lower value type ofservice.

As a result of the weighting of shareholder sales,94% of the total value of sales in 2015 relate tothe domestic market, followed by otherinternational markets outside the Africancontinent.

However, it should be highlighted that in terms oftotal income from service provision there is lessreliance on operators, with the representativenessof the international market remaining constant.

48

VALUE OF SALES

In 2015, the total value of concluded contractswas Akz 7.166 billion, triple the value of sales in2014. The end of the shareholders' agreementmarked a new sales phase for Angola Cables, withnew agreements being negotiated, whichcontributed towards an increase in shareholdersales. Despite increased sales efforts and thegreater number of contracts concluded, there hasbeen an increase in lower value serviceagreements and a fall in the price of internationalcircuits.

The significant increase in the total number ofconcluded agreements had an immediate effect onrevenue forecasts, which also increased dramatically.

Distribution of 2015 sales per service

366

2.086

3.408

4.4104.757 4.853 5.056 5.197

5.788 5.805 5.823

7.166

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2014 2015

Total cumulative sales in 2014 and 2015 (Millions of Akz)

Distribution of income per market in 2015 and 2014

77%

22%

1,5%

Circuits IP Transit Data Center

Distribution of 2015 sales per market

94%

1%5,0%

Angola Africa Other markets

Distribution of revenue from concluded contracts (Millions of Akz)

427147

301

1,002

386 218

2,756

3,515

708186

2015 2016 2017 2018 2019-2031

Contracts 2013 Contracts 2014 Contracts 2015

4,185 4,048

805

281519

Domestic Market – Operators

International Market

Domestic Market - Others

Annual Report 2015

Promotion of the Angola Cables brand

In 2015, the Angola Cables brand promotionstrategy was based on two main areas: increasingawareness and business promotion.

In order to consolidate the Angola Cables brand inthe national and international market, efforts weremade to diversify the communication channels withcustomers and potential customers. The companyincreased its presence on the web with more socialnetwork activity and more prominence in thesector's specialised directories. Awareness was alsoraised by increasingly effective interaction with thepress, which ensured a significant amount ofpositive news and comments.

In order achieve the set goals, participation in theindustry's main global events was also crucial, sincethis boosted commercial dynamism and sales.

One of the year's main objectives was to promotethe SACS, Monet, and Fortaleza Data Centreprojects among the main market players,showcasing the company's capability, strength, andsustained ambition. With this in mind, in January,Angola Cables participated in the PacificTelecommunications Council, in Honolulu – Hawaii,where it explained the status of the new submarinecable projects.

Angola Cables and its services received extensiveinternational media coverage throughout 2015. Thecompany was invited to speak at the Oracle OpenWord conference, in the United States, and tookpart in another edition of AfricaCom, in Cape Town,as well as in the International Telecoms Week, inChicago.

49

Brazil was at the centre of communicationsinvestment in 2015. The conclusion of the landconcession agreement for the construction of theSACS CLS and the Data Centre in Fortaleza wasmarked with an event there. In keeping with thestrategy followed in previous years, the companysponsored the Ilhabela Sailing Week Regatta as ameans of promoting the brand in Brazil.

A number of initiatives were also undertaken withinAngola. The first Angonix promotional event,named the “Angonix Peering Workshop”, tookplace in Luanda and demonstrated the benefits andfunctioning of the platform with the aim ofattracting new members. Also in Angola, thecompany won the award for the best services standat the International Information andCommunication Technologies Fair, EXPOTIC 2015.

Annual Report 2015

Technical

MAIN ACHIEVEMENTSIn 2015, there was an improvement in servicequality, particularly in terms of the activation of newservices, the integration of new customers, and theavailability of telecommunications systems (apartfrom the cut in the WACS cable).

Of the projects carried out in 2015, the followingstand out:

• Upgrade of WACS;

• Development of the MONET submarine cableproject;

• Monet station in Fortaleza (Monet CLS – CableLanding Station);

• SACS station and Data Centre in Fortaleza (SACSCLS/DC);

• Angonix;

• PoPs in Lisbon and Cape Verde.

MAIN PROJECTS

WACS capacity increase (Upgrade #1)

The first WACS technology upgrade was aimed atquadrupling the installed capacity. The project wascompleted in September and the new capacity wasmade available to the project's consortium membersin November 2015. Angola Cables quadrupled theinitial capacity, which will allow the continuedgrowth of capacity sales.

Throughout 2015, Angola Cables assisted with themanagement of the project and with variousactivities, in particular adapting the Sangano station,supporting the supplier (Huawei Marine Networks)with the equipment installation, and the acceptancetesting.

50

SACS CLS/DC

In July 2015, the land concession agreement wasconcluded between the Prefecture of Fortaleza andAngola Cables, for an initial period of 35 years, forthe site at Praia do Futuro where the SACS cablelanding station and data centre will be constructed.

The functional and technical definition of theinstallations were carried out in conjunction with theproject company ACECO TI. One of the mainobjectives is to ensure quality infrastructure, inaccordance with regulations and the most advancedtechnologies.

This phase of the project is expected to conclude inthe first half of 2016, and will be followed by theconstruction phase, which is set for completion in2017.

Angonix

The implementation of AngoNIX was concluded inthe first quarter and the infrastructure entered intoservice in March 2015. The aim was to rapidlyconquer the domestic market and prepare AngoNIXfor a leading position in the African market.

At the end of 2015, AngoNIX already had 11 activemembers, exceeding the goal for the year.

PoPs in Lisbon and Cape Verde

As part of the plans to expand the Angola Cablesnetwork, in 2015 the installation of SDH transmissionequipment for the PoPs in Cape Verde wascompleted, while installation began for the one inLisbon.

The PoP in Lisbon forms part of the Euroring, which isset for completion in 2016 and is a structuralcomponent of Angola Cables's quality IP Transit offer.The Lisbon PoP will be the main entry point intoEurope for Internet traffic from Africa. The IP routingequipment for the Lisbon PoP is expected to enterinto service in the first half of 2016.

Annual Report 2015

Technical

TECHNICALPERFORMANCE

MAIN TECHNICAL INDICATORS

The annual availability of the WACS system wassubstantially lower than the objective due to the cut inthe Sangano segment in June. The IP Transit andBackhaul systems recorded availability of 99.95%,which was higher than the objective. The completionof improvements to the infrastructure in the 3rdquarter meant that all 3 systems had 100% availabilityin the 4th quarter of 2015.

51

The amount of system downtime fell significantly between2014 and 2015, with the exception of the WACS system. Themost significant reduction related to the Backhaul system,which had suffered frequent faults in previous years but wasimpressively solid in 2015.

The WACS system faults were largely related to the cut in theSangano segment of the cable. The increase in scheduledWACS system downtime was due to the installation ofequipment, as well as other work carried out as part ofUpgrade #1, which was completed in September.

89.5%

99.9% 100.0%99.7%99.1%

99.8%

WACS Backhaul IP Transit

2015 2014

99.95%Objective

Availability of telecommunications systems since August 2015

System Downtime in 2014 and 2015.

20

WACS

49

6

Backhaul

13

4

IP Transit

Non-scheduled Scheduled

5

12

WACS

20

Backhaul

1 0

IP Transit

2015

2014

Annual Report 2015

Technical

Due to the cut in the cable in the Sangano segment,WACS was down for 37 days. During most of thistime, a portion of the traffic was restored by theSAT-3 cable.

52

0 0 780200 385

53,626

Internet Backhaul WACS

During 2015, 10 new circuits were activated, doublethe figure for 2014.

Of the total circuits activated, 70% were circuitswith a local access segment (Last Mile).

0 240 0

1,932

25,412

1,559

Internet Backhaul WACS

Scheduled Non-scheduled

2015

2014

System downtime in 2014 and 2015 (minutes).

1

0 0

1

0

2

1

2

3

0 0 0

1

0

1 1

0

1

0

1

0 0 0 0

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

De

c

2015 2014

Monthly Distribution of Circuit Activation in 2015.

Comparison of circuit activations in 2014 and 2015.

1 12

3

7

1 1

1

3

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

De

c

To

tal

Circuit with Last-Mile Circuit without Last-Mile

Annual Report 2015

Technical

In 2015, there was a significant reduction in theaverage activation time for circuits without LastMile thanks to the improved efficiency of AngolaCables.

By contrast, the average activation time for circuitswith a local access segment increased slightlycompared with the previous year.

53

The volume of IP traffic grew steadily throughout2015.

2

1

4

2


1

4

3

1


Activation Time at the responsibility of Angola Cables

Activation Time at the responsibility of Third Parties

Average time (days) to activate circuits in 2014 and 2015.

2015

2014

481657

5,301

663

1,853 1,9562,150

2,630

4,066

4,747

6,141 6,176

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

De

c

Mbps

IP traffic - Download peaks 95% percentile (Mbps) in 2015

81,500135,500

382,900

175,600

238,800

306,586420,300

653,000

836,096

900,000

1,181,696

1,896,400

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

De

c

IP Traffic – Volume of Traffic (GB) in 2015.

Annual Report 2015

Human Talent

HUMAN RESOURCES POLICYPeople are Angola Cables's most valuable assets.

It is due to its employees that the company is ableto ensure a quality service and a lastingrelationship with its customers, which is the mainsource of sustainability.

Angola Cables has a quality and innovativecustomer service culture. Transparency inrelationships and decision-making and thecontinual development of skills are otherdistinctive features of the company's culture.

Angola Cables invests in a meticulous recruitmentprocess, as well as training and development forits human talent. Performance evaluationthroughout the year is a key feature of staffdevelopment, continually promoting alignmentbetween corporate, departmental, and individualobjectives, as well as individual performance.

The success of Angola Cables depends on the skillsand motivation of its staff and it is for this reasonthat the company constantly seeks to foster teamspirit, the sharing of experiences, and knowledgeof the company strategy.

54

Customer Service

InnovationTeam Spirit

Focus on objectives and results

LeadershipQuality of service

Angola Cables

Attitude

ANGOLA CABLES EMPLOYEESIn 2015, the company had a total of 87 employees,which is 7 more than the previous year (8%increase).

Angola Cables is particularly attentive to staffdevelopment and retention. The retention ratewas 98% in 2015, up 6 percentage points on 2014.

The absenteeism rate for the year was 1.81%, up0.58 percentage points on the previous year.

1.23%

1.81%

2014 2015

Absenteeism rate

Absenteeism Rate

Number of Angola Cables employees

42

62

8087

2012 2013 2014 2015

48%

29%

8%

Annual Report 2015

Human Talent

DISTRIBUTION BY FUNCTIONAL AREA

In 2015, the Angola Cables organisationalstructure continued to be divided into threedirectorates (Technical; Commercial andMarketing; and Administrative and Financial),three departments (Human Talent; Legal; andPlanning and Reporting), and an executivesecretariat.

The Technical Directorate, made up of 38members distributed over 5 units, continues tobe the functional area with the most staff,making up 44% of the total workforce.

55

DISTRIBUTION BY FUNCTIONAL GROUP

The Angola Cables workforce is divided into four

different functional groups.

In 2015, the largest functional group was senior

technicians (69%), followed by supervisors and

specialists (18%). The support group was reduced

by 25%, while the director group numbers were

restored after a fall in the previous year.

The operational structure of the company is

closely linked to the growth in assets and the

business requirements. The Technical Directorate

has the largest number of senior technicians due

to the overriding need to ensure the expansion

and functionality of the telecommunications

infrastructure.

Number of Angola Cables employees by

functional area

17

25

11

2

12

44

16

1

9

55

14

2

Support SeniorTechnicians

Supervisorsand

Specialists

Directors andTop

Specialists

2013 2014 2015

Number of Angola Cables employees

by Functional Group

2

33

17

13

13 4

2

38

18

14

41

3

Exec

uti

ve S

ec

reta

riat

Te

ch

nic

al

Dir

ecto

rate

Ad

min

istr

ati

on

an

dF

inan

ce D

irec

tora

te

Co

mm

erc

ial a

nd

Ma

rketi

ng

Dir

ecto

rate

Hu

ma

n T

ale

nt

De

pa

rtm

en

t

Leg

al D

ep

art

men

t

Pla

nn

ing

an

d R

ep

ort

ing

De

pa

rtm

en

t

2014 2015

Annual Report 2015

Human Talent

PROFILEAngola Cables is a young, skilled organisation that iscapable of successfully completing its mission.

AGE

The most common age range of employees is 25-35years, followed by the 40-50 years range. Theaverage age of staff is 33, which shows hugedevelopment potential.

GENDER

The Angola Cables workforce is made up mainly ofmen (71%), reflecting the technical nature of mostof the operations. In terms of administrativefunctions, there is more balance between men andwomen.

56

NATIONALITY

Angola Cables relies mainly on highly-qualifiedAngolan staff. Despite being a high-tech enterprisewith a need for international experience, thecompany only had 3 foreign employees at the endof 2015.

In 2015, all employees at the subsidiary in Brazilwere Brazilian.

ACADEMIC QUALIFICATIONS

Due to the skills required by Angola Cables,recruitment is aimed mainly at graduates.

In 2015, of the 83 Angola Cables employees, 73(more than 88% of the total) were graduates. Theremaining 10 employees had secondary (7.2%) orprimary (3.6%) education.

Distribution of Angola Cables employees by age range, 2015

Distribution of Angola Cables employees by gender, 2015

6

2621

712

4 2 22

3326

9 82 1 2

< 25 25-30 30-35 35-40 40-45 45-50 50-55 >55

2014 2015

80

3

National Foreign

Distribution of Angola Cables employees

by nationality, 2015

24

59

Female Male

83

36

73

Total Ensino Superior Ensino Médio Ensino Básico

Academic qualifications of Angola Cables staff, 2015

SecondaryEducation

PrimaryEducation

Graduates

Annual Report 2015

Human Talent

TRAININGIn 2015, the company carried out 32 trainingactivities, amounting to 3,146 hours of training intotal.

The training provided throughout the year wasmainly focused on the specific skills of each area(81%). The sections that participated in the greatestnumber of training activities were the TechnicalDirectorate and the Commercial and MarketingDirectorate.

There were also internal training activities related tothe business, with “What is Angola Cables?” sessionsaimed at creating more and better Angola Cablesambassadors.

57

Training provided in 2015 by area and type of training

TECHNOLOGICAL ADVANCESIn 2015, Human Resources management showed aclear commitment to change, especially through theadoption of new information technologies forautomating tasks and supporting staff development,administrative processes and the integratedmanagement of human resources.

Angola Cables invested in a cloud platform thatallows performance assessments to be carried outinteractively, transparently, and effectively. Theapplication allows employees to update theirprogress with objectives at any time or place via theInternet, while assessors are able to monitorprogress and carry out evaluations.

The technological advances also included theautomation of recruitment processes, allowingcandidates to register on the Angola Cablesdatabase via the Internet and the companyexecutives to add job posts using the sameapplication, which is also available on the cloud.

In this way, the company is able to keep abreast oftechnological and human resource managementtrends, simultaneously promoting Internet usageand, as a consequence, one of its lines of business.

Specific Cross-cutting

Human TalentDepartment

Legal Department

TechnicalDirectorate

Commercial andMarketing

Directorate

Administrationand FinanceDirectorate

Annual Report 2015

TEAM BUILDING

In November, there was a meeting on the topic of"Leadership", which was aimed at developingleadership skills and strengthening the cohesion ofthe Angola Cables management team. For two days,supervisors, directors, and members of theExecutive Committee participated in intense teambuilding exercises. Together we are stronger.

ANNUAL PARTY

To celebrate the year's results and the 3rdanniversary of commercial operations, the “AnnualParty” was organised on 5 December, which wasattended by all staff in an informal setting. The CEOhighlighted the results, thanked everybody for theircontribution, and presented a preview of thechallenges for 2016.

Human Talent

PROMOTION OF EMPLOYMENT

In 2015, Angola Cables carried out four promotionalactivities in Angolan universities, with the aim ofencouraging final-year students to apply for jobswith the company.

The events, named “Angola Cables Day”, tookplace at the Agostinho Neto University, the CatholicUniversity, the Independent University, and theHigher Institute for Information Technology andCommunication. Six finalists from the latter wererecruited and now form part of the Angola Cablesteam.

ANNUAL MEETING

On 29 April, there was an annual Angola Cablesmeeting in Luanda aimed at involving all staff in thebuilding of a successful future for the company. Atthis meeting there was a presentation of thecompany's vision and strategy, an evaluation of theprevious year, and the main objectives for 2015, aswell as the status of each of the ongoing structuralprojects.

COMPANY QUIZ

In order to foster internal communication,knowledge sharing, teamwork, and competitivespirit, during October and November there was acompetition among all the company departments,which was called the "Company QUIZ".

There was a series of more than 100 questions, alldirectly or indirectly related to Angola Cables and itsbusiness, which were distributed at the beginning ofthe week and collected from each department at theend of the week. The initiative generated theanticipated healthy competition among the variousteams and, above all, significantly increased generalknowledge about the company, its environment, andits business in a playful manner. The winner, withthe most correct answers, was the NOC team.

58

Annual Report 2015

Sustainability

SUSTAINABILITYOur overriding responsibility is to provide services withthe quality expected by our customers, in an efficientmanner, thereby contributing to the success of ourshareholders and customers and the socio-economicdevelopment of the community in which we are present,namely by promoting access to communications and, inparticular, the Internet.

However, we understand that social responsibility is alsoan important factor in our success. Sustainabledevelopment is a cornerstone of our business strategy.We constantly take care to ensure that our actions arebeneficial to our community and, generally, contribute tothe legacy of a better world for future generations.

As well as actively participating in charitable projects andprogrammes for the protection of endangered species,Angola Cables encourages innovation in the sector andpromotes the dissemination of knowledge and skilledtraining, thereby contributing to the sustainableenvironmental and economic development of thesurrounding area.

OUR PEOPLE ARE OUR FUTURE

Angola Cables is committed to providing skilled trainingto Angolan staff. The recruitment policy seeks to attractyoung talent from the best universities in the country,educated in the company's various areas of activity.

In addition to professional training, in 2015 the companycontinued the training programme on environmentalconservation and work ethics.

Concern with staff well-being was reflected in theapplication of international health and safety bestpractices, making the work environment more pleasantand comfortable.

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CONSERVATION OF BIODIVERSITY

The company's sustainability policy includes applyingenvironmentally friendly solutions when constructingits infrastructures, such as the efficient use of energyand water, the use of non-polluting materials, and theselection of (underwater and land) cable routes withthe least environmental impact.

The activities and economic development of thecoastal region present one of the main threats to seaturtles, since they affect nesting sites and impedereproduction. Since the species is now severelyendangered, Angola Cables sponsors the KitabangaProject, promoted by the Faculty of Sciences at theAgostinho Neto University, which is dedicated toraising awareness and protecting sea turtles along theAngolan coast.

In addition, Angola Cables has raised awareness amonglocal communities, in particular fishermen in theSangano region, highlighting the importance to thecommunity of preserving native species.

MONET AND SACS AND THE PRESERVATION OF PROTECTED SPECIES

The Monet and SACS projects are subject to strictinternational regulations with respect to environmentalconservation and the granting of installation licenses bythe relevant authorities in Angola, Brazil, and the USA.

For example, the SACS cable route is being analysed toavoid any impact on the habitat and migration routesof leatherback and olive ridley turtles on the beach inSangano.

CREATING VALUE FOR ANGOLA

Angola Cables projects an international image of anenterprising, innovative, transparent, and responsibleAngolan company.

In addition, the company creates value for the Angolantrade balance by exporting services.

FinancialAnalysis

61

Annual Report 2015

Financial Results

ECONOMIC ANALYSIS

During the 2015 financial year, Angola Cables'sthird year of commercial activity, an operatingrevenue of Akz 4,329.32 million was recorded,deriving from the provision of services tocustomers and the WACS consortium.

The 65% increase in revenue compared to theprevious year includes the positive effect of sales inUSD, or indexed to the USD, in a year in which thedevaluation of the Kwanza against the USD was24%.

Operating expenses before depreciations rose 27%compared to 2014. In 2015, inflation doubled inAngola compared with 2014, to almost 14%, whichmeans the real increase in costs for the organicgrowth of the company was 13%.

The combined effect of boosting income andcontaining costs more than quintupled EBITDA,which stood at 1,311.28 million Akz. The EBITDAmargin was 30%, up 21 percentage points on theprevious year.

62

Operating income totalled Akz 830.11 million andwas positive for the first time since the companybegan operations.

This result is significant considering the high fixedcosts associated with the main business and thedeceleration in domestic market growth. The resultdemonstrates a strong focus on operationalefficiency.

Depreciations increased 10%, mainly due to thecompletion of the WACS Upgrade #1 project andother technological investments.

Million Kwanzas 2015 ∆ 2014 ∆ 2013

Operating revenues 4,329.32 65% 2,622.61 36% 1,925.21

Operating expenses before depreciations (3,017.93) 27% (2,379.12) 21% (1,968.87)

EBITDA 1,311.40 439% 243.49 558% (43.66)

Depreciations (481.28) 10% (435.72) 14% (383.45)

Operating Income 830.11 432% (192.22) 55% (427.11)

EBITDA Margin 30% 21 p.p. 9% 11 p.p. -2%

Annual Report 2015

Financial Results

SUMMARY

In 2015, the company made a net profit of Akz 551million. This was the first year that the companymade a net profit since the start of trading.

The financial income were down 87% compared tothe previous year, mainly due to changes in the wayinterest on shareholder loans is recorded.

63

Other non-operating income was negative (loss), duemainly to the adjustment of costs from previous yearsand the creation of the provision for tax costs relatingto the WACS system and Monet project followingsubmission of a request to the competent authorities.

Million Kwanzas 2015 ∆ 2014 ∆ 2013

Operating revenues 4,329.32 65% 2,622.61 36% 1,925.21

Operating expenses before depreciations (3,017.93) 27% (2,379.12) 21% (1,968.87)

Depreciations (481.28) 10% (435.72) 14% (383.45)

Operating income 830.11 432% (192.22) 55% (427.11)

Financial income 14.57 -87% 110.22 161% 42.18

Other non-operating income (294.00) -157% (114.49) -75% (65.38)

Net income for the year 550.69 280% (196.50) 56% (450.32)

Annual Report 2015

OPERATING REVENUE

Most of the company's revenue is in USD or indexedto the USD. Therefore, the 24% devaluation of theAkz against the USD in 2015 had a positive effect onincome in Akz. The annual increase in revenue inUSD was 43%.

Revenue from the domestic market grew 71% thanksto increased sales of circuits and IP Transit, resultingfrom an expanded customer base.

Revenue from outside the domestic marketamounted to 18% of the total, down 2 percentagepoints on the previous year. The weighting ofrevenue from the international market shouldincrease significantly in the coming years.

64

The sale of international transmission capacity(circuits) in the WACS system continues to be thecompany's main source of revenue, corresponding to79% of total revenue. The IP Transit servicerecorded strong growth in 2015, amounting to 14%of the total. The Data Centre services, in particularColocation, continued to have a minor impact onrevenue due to the limitations on available space inAngoNAP.

Backhaul is the fibre optic infrastructure betweenthe Sangano station and the AngoNAP connectioncentre, in which Angola Cables also leases circuits.

Evolution of revenues 2013-2015

Distribution of revenues in 2015

Million Kwanzas 2015 ∆ 2014

Domestic market revenues 3,430.88 71% 2,011.32

International market revenues 783.57 49% 526.62

Landing Service Provider (Sangano) 114.87 36% 84.67

Operating revenues 4,329.32 65% 2,622.61

1,925.21

2,622.61

4,329.32

2013 2014 2015

Proveitos

36%

65%

79%

14%

4% 1% 1% 1%

WACS Trânsito IP Backhaul Colocation Last Mile Outros

4,329.32

IP Transit Others

Financial Results

Annual Report 2015

Depreciations totalled Akz 481.28 million in 2015, up10% on the previous year. This increase mainly relatesto the completion of the WACS Upgrade #1 project andinvestment in telecommunications infrastructure.

65

OPERATING EXPENSES

In 2015, operating expenses rose by 24% compared tothe previous year, totalling Akz 3,499 million.

The largest rise related to staff expenses, due to theincrease in employees (9%) and the first salary updatesince 2012. The weighting of staff expenses againsttotal operating expenses before depreciations rose by31%, up 8 percentage points on the previous year.


Staff expenses (920.76) 73% (533.59)

Depreciations (481.28) 10% (435.72)

Other operating expenses and losses (2,097.17) 14% (1,845.53)

Operating expenses (3,499.21) 24% (2,814.83)

Staff costs Million Kwanzas

2015 2014 %

Remuneration - staff 598.48 351.14 66%

Remuneration - statutory bodies 149.44 118.84 22%

Training 19.16 29.95 6%

Remuneration-related expenses 38.13 26.63 5%

Work accident and disease insurance 8.27 5.99 1%

Other staff related expenses 107.28 1.05 0%

Total 920.76 533.59 100%

Items (Million Kwanzas) 2015 2014

Tangible assets

Buildings and other constructions 322.88 330.30

Administrative equipment 40.28 25.66

Basic equipment 54.04 29.36

Loading and transportation equipment 31.84 38.74

Land and natural resources 3.67 3.67

Other tangible assets 0.36 0.21

Intangible assets

Other intangible assets 28.20 7.77

Total 481.28 435.72

Financial Results

Annual Report 2015

Other operating expenses and losses grew by 14%overall. However, supplies and third-party services onlygrew by 10%, below annual inflation. By contrast, thecost of leasing transmission infrastructure fromdomestic operators – backhaul and access circuits (lastmile), increased 27%.

Supplies and third-party services are detailed below.

66

OPERATING INCOMEOperating income in 2015 stood at Akz 830.11 million.

An operating profit was recorded for the first time

since commercial operations began, continuing the

trend of sustained improvement since 2012. This

result is especially significant considering the

unfavourable macroeconomic situation in 2015 and

the weighting of the domestic market on the

company's results.

Evolution of Operating Income 2012-2015

Other operating expenses and losses

(Million Kwanzas)

2015 ∆ 2014

Subcontracts 348.03 27% 273.09

Supplies and third-partyservices

1,705.83 10% 1,555.86

Taxes 43.30 161% 16.58

2,097.17 14% 1,845.53

(690.43)

(427.11)(192.22)

830.11

2012 2013 2014 2015

Items (Million Kwanzas) 2015 2014

Fees 628.11 541.18

Maintenance and repair 342.49 287.11

Travelling and subsistence allowances 139.86 145.51

Rents and leases 114.28 92.82

Maintenance and repair materials 78.81 0.29

Other services - INACOM licenses 72.29 71.56

Advertising and publicity 71.31 114.51

Technical support 64.57 106.31

Communication 40.45 73.96

Fuel and other fluids 37.80 28.52

Monitoring and security services 34.42 31.83

Commission fees 22.68 12.72

Cleaning, hygiene and comfort 15.24 10.91

Insurance 13.07 9.34

Office materials 8.71 6.63

Water 7.68 6.88

Representation expenses 3.56 4.58

Fast-wearing tools and appliances 3.49 8.22

Books and technical documentation 1.83 0.54

Legal services 1.07 2.38

Electricity 0.60 0.10

Protection, security, and comfort materials 0.37 -

Other supplies 3.15 -

Total 1,705.83 1,555.86

Financial Results

Annual Report 2015

NET INCOME

Net income in 2015 stood at Akz 550.69 million. As withoperating income, net income was positive for the firsttime since the company began trading, confirming theupward trend recorded in previous years and the valuecreation prospects.

The net income in 2015 benefited from Industrial Tax(corporate income tax) credits relating to the lossesrecorded in previous years.

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FINANCIAL INCOME

The financial income amounted to Akz 14.57 million in2015.

The financial income balances exchange rate variations,interest from investments, interest on shareholder loansadvances, and bank charges. The difference in thefinancial income compared to the previous year can belargely explained by the inclusion of interest onshareholder loans under this heading, which waspreviously recorded differently. This interest waspartially (81%) offset by the interest obtained fromfinancial investments.

Composition of Financial income in 2015

Evolution of Financial income 2012-2015

(66.29)

42.18

110.22

14.57

2012 2013 2014 2015

2012 2013 2014 2015

43%

56%

380%

(96.81)

67.6043.78

Shareholder loans Banking services Exchange rate variations

Financial Results

Annual Report 2015

CAPITAL STRUCTUREAt 31 December 2015, the capital structure of Angola Cables comprised 68% of equity and 32% of debt. Comparedwith 2014, there was a 1 percentage point increase in the weighting of equity on the capital structure.

COMPOSITION OF EQUITY

There was a 5% increase in equity compared with the previous year thanks to the net profit for the year and theinjection of supplementary capital from a shareholder in relation to investment in the WACS system.

68


EQUITY 11,624.14 5% 11,063.09

LIABILITIES 5,545.36 0% 5,571.98TOTAL 17,169.50 3% 16,635.07


Share Capital 13,141.41 0% 13,131.05

Retained earnings (2,067.95) -10% (1,871.46)

Net income for the year 550.69 280% (196.50)

TOTAL EQUITY 11,624.14 5% 11,063.00

Evolution of the capital structure 2012-2015

7,968.86 7,518.5411,063.09 11,624.14

2,559.71 4,533.56

5,571.98 5,545.3610,528.57

12,052.11

16,635.07 17,169.50

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

Capital Próprio Passivo TotalEquity Debt

Financial Results

Annual Report 2015

CAPITAL STRUCTURE

COMPOSITION OF LIABILITIES

At the end of the 2015 financial year, Angola Cables's liabilities totalled Akz 5,545.36 million, down Akz 26.62 million on the previous year.

The amount of medium and long-term loans increased in return for a reduction in provisions for other risks andcharges, by transferring the accrued interest on shareholder loans from previous years, plus interest accrued in2015, from the latter item to the former.

There was a 30% reduction in accounts payable as a result of the company's efforts to settle debts with suppliers assoon as it began to recover from the heavy constraints on liquidity experienced in the second half of 2014 and thefirst quarter of 2015.

Other current liabilities include operating licenses payable to INACOM in accordance with a payment plan that iscurrently under negotiation, payments due to suppliers for services provided but not invoiced in 2015, and aprovision for variable pay to staff linked to the individual annual performance appraisal.

69

LIABILITIES (Million Kwanzas) 2015 ∆ 2014

Medium- and long-term loans 3,710.12 12% 3,320.37

Provisions for other risks and charges 251.21 -9% 275.90

Accounts payable 988.56 -30% 1,413.25

Other current liabilities 595.47 6% 562.45

TOTAL LIABILITIES 5,545.36 0% 5,571.98

Financial Results

Annual Report 2015

COMPOSITION OF ASSETSAngola Cables's assets at the end of 2015 amounted to Akz 17,170 million, an increase of 3% compared to 2014.Their composition was as follows:

There was a 12% increase in tangible assets, mainly due to continued investment in the Monet and SACS projects,the start of the cable landing station project in Fortaleza, the WACS Upgrade #1, Backhaul Phase 2 (increasedcapacity and availability), AngoNIX, and IP Transit projects, outfitting the new facilities in the Dolce Vita building(NOC and Technical Directorate), and the purchase of a service vehicle.

There was a 110% increase in intangible assets, with the SAP system upgrade (financial and asset management andsalary processing) and the customisation of the human resources management application Oracle Fusion HCM(recruitment, assessment, and development).

Investment in subsidiaries and associates reflects the capitalisation of the Brazilian subsidiary Angola CablesHolding Ltda.

70

Evolution of Assets 2012-2015

ASSETS 2015 ∆ 2014

Non-current assets

Tangible assets 11,648.07 12% 10,397.48

Intangible assets 180.42 110% 86.12

Investments in subsidiaries and associates 101.48 -

Other non-current assets - 73.27

TOTAL NON-CURRENT ASSETS 11,929.98 13% 10,556.86

Current assets

Accounts receivable 2,712.59 20% 2,263.07

Cash and cash equivalents 2,483.92 -33% 3,711.98

Other current assets 43.00 -58% 103.16

TOTAL CURRENT ASSETS 5,239.52 -14% 6,078.21

TOTAL ASSETS 17,169.50 3% 16,635.07

8,645 9,143 10,557 11,930

1,883 2,9096,078 5,240

10,52912,052

16,635 17,169

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

Activos Não Correntes Activos Correntes TotalNon-current assets Current assets

Financial Results

Annual Report 2015

Operating assets classed as tangible assets arerecorded as indicated in the diagram below.

Most of the construction in progress, amounting toAkz 2,849 million, relates to the Monet cable, whoseconstruction began in the 4th quarter of 2014.Construction for the SACS and Fortaleza CLS projectsrelates to construction phase preparatory works.

71

NATURE OF ASSETS

The diagram below shows the breakdown of assetsand the relative weighting of each heading.

TANGIBLE ASSETS

Most (70%) of the value under the tangible assetsheading relates to operating assets. The remaining30% relates to ongoing investment projects(construction in progress).

Breakdown of Assets in 2015

Breakdown of Tangible Assets in 2015

Breakdown of Tangible Assets

Breakdown of construction in progress

7,270.98

428.48

191.59

173.08

39.89

3.96

Buildings and other constructions

Basic equipment

Office equipment

Land and natural resources

Loading and transportationequipment

Other Tangible Assets

70%

30%

Imobilizações corpóreas Imobilizado em curso

11,648.07

Tangible assets Construction in progress

80%

16%

2%

Monet SACS

Angonap Backhaul

Landing Station - Fortaleza Others

3,540.10

68%1%1%

16%

14%

0%

Imobilizaçoes corpóreas Imobilizações incorpóreas

Investimentos subsid. e assoc. Contas a receber

Disponibilidades Outros activos correntes

17,169.50

Tangible assets

Investments in subsi. and assoc.

Cash and Cash Equivalents

Intangible assets

Accounts receivable

Other current assets

Financial Results

Annual Report 2015

Financial Indicators

CURRENT LIQUIDITY

The current liquidity ratio reflects the extent to whichcurrent liabilities are covered by current assets. At theend of 2015, the current liquidity ratio of Angola Cableswas 3.3. Excluding the effect of the financing of the newsubmarine cables, as explained under the immediateliquidity ratio, the current liquidity ratio at the end of theyear was 2.5.

72

IMMEDIATE LIQUIDITY

The immediate liquidity ratio reflects the company'sability to meet its short-term obligations with cash andcash equivalents. At the end of 2015, 49% of cash andcash equivalents, to the amount of Akz 1,208 million,were reserved exclusively for investment costs relating tothe SACS and Monet projects. After removing the fundsand costs relating to these projects from current assetsand liabilities, the immediate liquidity ratio at the end of2015 was 0.8.

DEBT

The debt ratio shows the ratio between liabilities andassets, reflecting the degree to which the operation isfinanced by borrowed capital. At the end of 2015, thisratio was 0.32, down 1 percentage point on theprevious year.

FINANCIAL AUTONOMY

The financial autonomy ratio measures theproportion of assets that are financed with equity.At the end of 2015, the financial autonomy ofAngola Cables was 68%.

1.9

1.0

1.9

1.6

0.8

2012 2013 2014 2015

0.9 + 0.9

Current liquidity excluding the effect of SACS and Monet (Assets and Liabilities)

0.33.4

2.7

3.13.3

2.5

2012 2013 2014 2015

- 0.9+ 0.9

- 0.3

Current liquidity excluding the effect of SACS and Monet (Assets and Liabilities)

0.76

0.520.67 0.68

2012 2013 2014 2015

+0.04 +0.01- 0.13

0.24

0.38

0.33 0.32

2012 2013 2014 2015

+ 0.14

-0.05-0.01

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FinancialStatements

75

Annual Report 2015

Balance Sheet

76

FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014(AMOUNTS EXPRESSED IN KWANZAS)

Notes 2015 2014

ASSETS

Non-current assets

Tangible assets 4 11,648,072,851 10,397,476,838

Intangible assets 5 180,422,574 86,119,699

Investments in subsidiaries and associates 6 101,482,600 -

Other non-current assets 9 - 73,267,388

TOTAL NON-CURRENT ASSET 11,929,978,025 10,556,863,925

Current assets

Accounts receivable 9 2,712,592,293 2,263,067,504

Cash and cash equivalents 10 2,483,923,270 3,711,982,835

Other current assets 11 43,004,139 103,156,536

TOTAL CURRENT ASSETS 5,239,519,702 6,078,206,875

TOTAL ASSETS 17,169,497,728 16,635,070,800

EQUITY AND LIABILITIES

Equity

Share capital 12 13,141,406,741 13,131,046,741

Retained earnings 14 (2,067,952,487) (1,871,456,801)

Net income for the year 550,687,492 (196,495,686)

TOTAL EQUITY 11,624,141,746 11,063,094,254

Non current liabilities

Medium- and long-term loans 15 3,710,116,790 3,320,372,467

Provisions for other risks and charges 18 251,206,242 275,902,303

TOTAL NON-CURRENT LIABILITIES 3,961,323,032 3,596,274,770

Current liabilities

Accounts payable 19 988,564,212 1,413,248,396

Other current liabilities 21 595,468,739 562,453,380

TOTAL CURRENT LIABILITIES 1,584,032,951 1,975,701,776

TOTAL EQUITY AND LIABILITIES 17,169,497,728 16,635,070,800

Annual Report 2015

Income Statement

77


Notes 2015 2014

Service Provision 23 4,214,450,338 2,537,938,057

Other operating revenues and gains 24 114,871,278 84,672,390

4,329,321,616 2,622,610,447

Staff expenses 28 (920,757,358) (533,591,972)

Depreciations 29 (481,280,778) (435,716,878)

Other operating expenses and losses 30 (2,097,168,930) (1,845,525,807)

(3,499,207,065) (2,814,834,657)

OPERATING INCOME 830,114,551 (192,224,210)

Financial income 31 14,569,873 110,221,294

Other non-operating income 33 (293,996,932) (114,492,769)

INCOME BEFORE TAXES 550,687,492 (196,495,686)

NET INCOME FOR THE YEAR 550,687,492 (196,495,686)

Annual Report 2015

Cash Flow Statement

78


Notes 2015 2014

Cash flow from operating activities

Cash receipts from customers 23 3,805,757,074 2,266,406,740

Cash payments to suppliers and employees 30 (3,741,444,665) (1,988,511,160)

CASH GENERATED BY OPERATIONS 64,312,410 277,895,580

Tax on profits 6,107,314 -

Other receipts/payments 637,116,709 -

NET CASH FROM OPERATING ACTIVITIES 707,536,434 277,895,580

Cash flow from investment activities

Receipts from:

Tangible assets 4 - 67,805,100

Payments relating to:

Tangible assets 4 (1,703,674,085) (1,396,214,038)

Intangible assets 5 (122,505,581) (66,004,465)

Financial investments 6 (101,482,600) -

NET CASH USED IN INVESTMENT ACTIVITIES (1,927,662,266) (1,394,413,403)

Cash flow from financing activities

Receipts from:Capital increases, supplementary capital contributions, and premiums 15 10,360,000 3,880,800,000

Interest and similar income received 31 78,515,357 9,955,014

Payments relating to:

Interest and similar expenditure paid 31 (96,809,088) (113,650,132)

NET CASH USED IN FINANCING ACTIVITIES (7,933,732) 3,777,104,882

NET INCREASE IN CASH AND CASH EQUIVALENTS (1,228,059,565) 2,660,587,059

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

PERIOD 3,711,982,835 1,051,395,776

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 2,483,923,270 3,711,982,835

Annual Report 2015

Notes to the Financial Statements

Foreword

1 ACTIVITY

2 ACCOUNTING POLICIES ADOPTED IN THE PREPARATION OF THE FINANCIAL STATEMENTS

3 CHANGES TO ACCOUNTING POLICIES

Notes to the balance sheet

4 TANGIBLE ASSETS

5 INTANGIBLE ASSETS

6 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

8 STOCKS

9 OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE

10 CASH AND CASH EQUIVALENTS

11 OTHER CURRENT ASSETS

12 SHARE CAPITAL

14 RETAINED EARNINGS

15 MEDIUM AND LONG-TERM LOANS

18 PROVISIONS FOR OTHER RISKS AND CHARGES

19 ACCOUNTS PAYABLE

21 OTHER CURRENT LIABILITIES

Notes to the income statement

23 PROVISION OF SERVICES

24 OTHER OPERATING REVENUES AND GAINS

28 STAFF EXPENSES

29 DEPRECIATIONS

30 OTHER OPERATING EXPENSES AND LOSSES

31 FINANCIAL INCOME

33 OTHER NON-OPERATING INCOME

35 INCOME TAX

Other notes relating to the financial position and operating results

36 COMMITMENTS NOT REFLECTED UNDER LIABILITIES

38 EVENTS AFTER THE BALANCE SHEET DATE

40 TRANSACTIONS WITH RELATED ENTITIES

79

FOR THE YEAR ENDED 31 DECEMBER 2015(AMOUNTS EXPRESSED IN KWANZAS)

Annual Report 2015


Foreword

1. ACTIVITY

1.1 BRIEF DESCRIPTION OF THE COMPANY

Angola Cables SA (hereinafter “Angola Cables” or“Company”) is a public limited company incorporatedby a public deed dated 4 June 2009, in Luanda, at theNotary Office of the GUE (Guiché Único da Empresa).

The company's corporate object consists in being aparticipating member of the international consortiumfor the construction, operation, and maintenance of theWACS project, the commercial exploitation oftelecommunications through submarine cables andaccess to neighbouring countries, and all connectedactivities.

The company is at the investment stage for two newsubmarine cables, namely SACS and Monet, which areexpected to enter service in early 2017.

The following stakes are held in the company: 51% byAngola Telecom, 31% by Unitel, 9% by MS Telecom, 6%by Movicel, and 3% by Mundo Startel, as set out in note12.

80

2. ACCOUNTING POLICIES ADOPTED IN THE PREPARATION OF THE FINANCIAL STATEMENTS

2.1 BASIS FOR PRESENTING THE FINANCIAL STATEMENTS

The financial statements were prepared in accordancewith the General Accounting Plan (GAP), approved byDecree Law no. 82/01 of 16 November, which applies tocommercial companies and public companies that operatein Angola or other countries and have their headquartersin Angola.

The financial statements, which include the balance sheet,income statements by nature, and the notes to theaccounts, were approved by the company's Board ofDirectors on 30 March 2016. They are in Kwanzas (AOA)and were drawn up in accordance with the principles ofcontinuity and accrual in which items are recognized asassets, liabilities, equity, earnings and expenses when theymeet the definitions and recognition criteria for theseelements in the GAP, in accordance with the qualitativefeatures of relevance, reliability, faithful representation,economic substance, neutrality, prudence, andcompleteness in all material aspects.

The financial statements were also prepared in accordancewith the accounting principles of consistency, materiality,no-netting, and comparability.

No derogations were made from the GAP directives. TheInternational Financial Reporting Standards (IFRS) are alsoused in matters not covered by the GAP or when theformer provides more reliable financial information.

The notes in the financial statements were numbered inaccordance with the official plan. When they were notapplicable they were omitted, since they were not relevantto the reading of the financial statements.

There are no materially relevant situations on the balancesheet and income statement that are not comparable withthe previous year.

Annual Report 2015

2.2.1 RECOGNITION CRITERIA AND SPECIFIC VALUATION BASES

Tangible assets

Tangible assets comprise fixed and movable physicalassets used by the Company during its operations,which are not destined to be sold or transformedand have a period of use greater than one year.

The tangible assets acquired are recorded at theiracquisition price, which includes their purchase price,including import rights and non-reimbursablepurchase taxes, after deducting discounts andreductions, and any costs directly attributable tobringing the asset to the location and conditionnecessary for it to be capable of operating in theintended manner, deducting accumulateddepreciation and extraordinary amortisations. On thespecific issue of investments made in the WACSsubmarine cable, the value recorded under tangibleassets corresponds to the Company's share in theoverall investments made by the consortium.

Subsequent costs are included in the carrying valueof the asset or recognised as separate assets, asappropriate, only when future financial benefits arelikely to fall on the company and their respective costcan be reliably measured.

The main spares and reserve equipment areclassified as fixed assets when the Company expectsto use them during more than one period.

Improvements are only recognised as assets when the expenditure improves the condition of the asset beyond its originally evaluated level of performance, namely:

• Modification of an element of an installation in order to prolong its useful life, including an increase in capacity;

• Replacement of machine parts to achieve a significant improvement in the quality of production;

• Adoption of new production processes that allow a significant reduction in the previously evaluated operating costs.

2.2 VALUATION BASES USED IN PREPARING THE FINANCIAL STATEMENTS

The attached financial statements were prepared ona going concern basis using the company's books andaccounting records, taking historical cost as a basis.

Preparation of financial statements in accordancewith the GAP requires Management to makejudgements, estimations and assumptions thatinfluence the application of the accounting policiesand reported amounts of assets, liabilities, revenuesand expenses. Estimates and associated assumptionsare based on experience and other factorsconsidered reasonable in context and that form thebasis for judgements on the values of assets andliabilities that are not readily apparent from othersources. Actual results may differ from the estimates.The issues that require a greater level of judgementor complexity or where assumptions and estimatesare considered to be significant are presented innote 2.2.2 – Relevant accounting estimates andjudgements.


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Maintenance and repair costs are recognised as an expense in the financial statements if they have been made torestore or maintain the future economic benefits of the asset. Maintenance and repair costs aimed at restoring thefuture economic benefits of the asset, the losses on which had already been considered at the initial record date, arecapitalised provided that the recorded amount:

• Does not exceed the recoverable amount of the asset;

• Can be recovered from the future use of the asset.

Replacement costs are recognised as an expense in the financial statements because they are aimed at maintaining thefuture economic benefits of the asset.

The company analyses the impairment of tangible assets whenever events and circumstances may indicate that the bookvalue of an asset exceeds its recoverable amount, any impairment being recognised in the income statement, exceptwhen the asset has been previously revalued. In this case, the impairment identified is covered by the revaluationreserve in the first instance.

Tangible assets in progress reflect fixed assets that are still under construction and are recorded at acquisition cost. Theybecome tangible assets and begin depreciating at the moment the investment projects are available for use.

The useful life of a fixed asset is the period during which a depreciating asset is expected to be used by the company.Land does not depreciate since it has an unlimited useful life.

Depreciation in tangible assets are calculated according to the straight-line method, in accordance with the following periods of useful life expected of the assets, according to the law in force in each financial period:

Losses resulting from the retirement of a tangible fixed asset are determined by the value for which it is recorded (grossvalue deducted from the corresponding depreciation) and are recognised in the financial statements.

Gains or losses arising from the disposal of a tangible fixed asset are determined by the difference between theestimated net income from the disposal and the amount for which the asset is recorded, being recognised as gains orlosses in the financial statements, as appropriate.

82

Assets Useful life

Buildings and other constructions 25

Basic equipment 4-10

Loading and transportation equipment 3

Administrative equipment 6-10

Other tangible assets 6-10

Annual Report 2015

Investments in subsidiaries and associates

Investments in subsidiaries over which the companyhas direct or indirect control are recorded atacquisition cost, minus any possible contingent losses.Control is presumed to exist when the company holdsmore than half the voting rights or when it has thepower to govern the financial and operating policiesof a company or an economic activity in order toobtain benefits from it, even if it holds less than a 50%stake.

Financial investments in associates are recorded attheir acquisition cost. Associates are entities overwhich the company has significant influence withouthaving control over financial and operating policies.The company is deemed to have significant influencewhen it has the power to exercise more than 20% ofthe associate's voting rights. When the company holdsless than 20% of the voting rights, it is deemed not tohave a significant influence, except when thisinfluence can be clearly demonstrated.

Significant influence is usually demonstrated in one ormore of the following ways:

• Representation on the board of directors orequivalent governing body;

• Involvement in defining policies, includinginvolvement in decisions on dividends and otherdistributions;

• The existence of material transactions betweenthe company and the associate;

• Interchange of managerial personnel;

• Provision of essential technical information.

Intangible assets

The company's intangible assets are recorded atacquisition price minus the respective accumulatedamortisations and extraordinary amortisations.

The company assesses for impairment wheneverevents and circumstances may indicate that the bookvalue of an asset exceeds its recoverable amount, anyimpairment being recognised in the incomestatement. The recoverable amount is determined asthe greater of the net selling price or its value in use,calculated on the basis of the current value of theestimated future cash flows obtained from thecontinued use of the asset and its sale at the end of itsuseful life.

Intangible assets are amortised on a straight-line basisfor their duration period, which is six years onaverage.


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Annual Report 2015


Accounts receivable

Receivables include sums due from customers and other debtors, as well as state credits relating to retentions andinterim payments.

In the first instance, receivables are recognised as the lower amount between their nominal value and their netrealisable value and are included on the balance sheet, deducted from any associated provisions for bad debts.

Provisions for identified bad debts are charged against income when there is objective evidence that the total amountowed, with respect to the original conditions of the receivables, will not be received. The charge is subsequentlyreversed if there is a reduction in the estimated losses in a subsequent period.

In the case of receivables relating to shareholder customers, the company does not consider aged balances to be aneffective credit risk, which is why there are no bad debt provisions for these sums.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, bank deposits, and other short-term, highly liquid investments with amaturity up to three months that are readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value.

Foreign currency balances and transactions

Assets and liabilities in foreign currencies are converted into kwanzas (AOA) at the exchange rate on the balance sheetdate. The exchange rates used for converting receivables or payables in foreign currency on the balance sheet date wereas follows:

Exchange rate differences, whether favourable or unfavourable, that arise from fluctuations in the rate between thetransaction dates and the collection, payment, and balance sheet dates, are recorded as profits and/or losses in theincome statements for the accounting period under the foreign exchange gains/losses item.

As for non-monetary items, when a gain or loss is recognised in the results, any exchange rate difference included in thisgain or loss is recognised in the results. When a gain or loss is recognised directly in equity, the related foreign exchangerate differences are also recognised in equity.

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Currency 2015 2014

United States of America Dollars (USD) 134.64 102.86

European Union Euro (EUR) 147.10 125.20

United Kingdom Pounds Sterling (GBP) 199.59 160.00

Brazilian Real (BRL) 40.00 -

Annual Report 2015

Other current liabilities

Other current liabilities include payable sums on theexpense account whose binding document had notyet been received at the balance sheet date; theyare valued at historical cost. This item also includesincome from service provision agreements which, insome cases, span different financial periods. In thesecases, in accordance with the accrual method, thecompany defers the income that does not relate tothe year in question.

Revenue

Revenue associated with service provision isrecognised in the financial statements according tothe stage of completion of the service provision onthe balance sheet date when the outcome of atransaction can be reliably estimated. The outcomeof a transaction can be reliably estimated when allthe following conditions are met:

• The amount of revenue can be reliablymeasured;

• It is likely that the economic benefits associatedwith the transaction will flow into the Company;

• The stage of completion of the transaction onthe date of the balance can be reliablymeasured;

• The costs incurred with the transaction and thecosts to conclude the transaction can be reliablymeasured.

Other current assets

Other current assets include amounts relating tosums to allocate to future periods.

This account records sums that are to be recognisedin future periods, in accordance with the accrualmethod.

Provisions for other risks and charges

Provisions are recorded when the company has apresent obligation (legal or implicit) resulting from apast event and it is likely that resources will be usedto settle the obligation, the amount of which can bereasonably estimated. The amount of provisionsrecorded is a best estimate, on the date ofreporting, of the resources necessary for settling theobligation. This estimate is determined by takinginto account the risks and uncertainties associatedwith each obligation. Provisions for other risks andcharges are subject to revision on an annual basis,depending on the forecast for the respective futureresponsibilities. Provisions for future operatinglosses are not recognised.

Accounts Payable

Accounts payable include sums owed to suppliersand the state and are valued at the historical cost ofthe transactions. Sums owed in foreign currency arerecorded by their value in kwanzas, using theexchange rate in effect on 31 December. Foreigncurrency transactions are recorded by their value inkwanzas, using the exchange rate in effect on thetransaction date.


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Annual Report 2015

• Excise Duty: the telecommunications servicesprovided by the company are subject to exciseduty at a rate of 5% under Executive Decree no.41/99, of 10 December, revised by PresidentialLegislative Decree no. 7/11, of 30 December;

• Property Tax: this tax corresponds to 15% ofproperty leases and rentals agreed by thecompany, in accordance with Law no. 18/11, of21 April;

Management is convinced that there are no relevantfiscal responsibilities, real or contingent, that havenot been carried and that the tax authorities willmake no corrections to the taxable amount of anymaterial bearing on the company accounts.

Subsequent events

Events after the balance sheet date that provideadditional information about conditions that existedat the balance sheet date are reflected in thefinancial statements. If there are materially relevantevents after the balance sheet date, they aredisclosed in the annex to the financial statements.

Received interest is recognised in accordance withthe accrual method, taking into account the sumowed and the effective rate for the period up tomaturity.

The differences between the amounts received andpaid and the corresponding income and expensesgenerated in accordance with the accrual methodare registered under the "Other current assets" and"Other current liabilities" items.

They are not recognised if there are doubtssurrounding the collectability of the product orprovision of services.

Taxes

The company is subject to the following taxes:

• Social security: this contribution corresponds to11% of staff remuneration, 3% of which is theresponsibility of the employee;

• Labour income tax (IRT): this tax is retained bythe company when processing employees' wagesand is calculated based on salary. UnderExecutive Decree no. 62/03, of 7 November, 13variable bands were established, with themaximum rate being 17%;

• Stamp Duty: this tax is paid monthly andcorresponds to 1% of sales and service provisionrevenue. The tax payable is calculated based onreceipts.

• Industrial Tax – Law on construction worktaxation: Law 19/14, of 22 October, establishesthe tax regime for the settlement and interimpayment of Industrial Tax on service provisioncontracts (6.5%), using the withholding taxsystem;

• Industrial Tax: this tax corresponds to 30% oftaxable income, based on financial results,adjusted in accordance with current Angolan taxlegislation. The company is required to submit aDeclaration of Income from Collections for theFinancial Year (Model 1 – Group A), which issubject to review and correction by the Angolantax authorities for a period of five years.


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Annual Report 2015

2.2.2 RELEVANT ACCOUNTING ESTIMATES ANDJUDGEMENTS

In preparing the financial statements, management isrequired to make judgements and estimates whenmaking decisions regarding certain accounting processeswhich impact on the total reported values of the assets,liabilities, equity, earnings, expenses, and disclosures atthe balance sheet date. Results and actual effects at theclosing date of transactions may differ from anyestimates and judgements made, particularly regardingthe effect of actual expenditure and earnings.

Estimates are determined by management judgementsand are based on:

• The best information and knowledge of currentevents available at the time, in some cases supportedby reports from independent experts;

• The actions that the Company believes it is able tocarry out in the future with respect to the situationsthat are subject to estimation.

The main accounting estimates and judgements used inapplying the accounting policies are discussed in this notein order to improve the understanding of how theirapplication affects the reported results and disclosures. Amore detailed description of the main accounting policiesemployed by the Company is given in note 2.2.1 of thisAnnex.

If one considers that in some situations there arealternatives to the accounting policies adopted by theCompany, the reported results might have been differentif a different policy had been chosen. The Board ofDirectors believes that the choices made are appropriateand that the financial statements provide an adequatepicture of the Company's financial position and results inall materially relevant respects. The results of thefollowing alternatives analysed are presented only inorder to help reader to understand the financialstatements and do not intend to suggest that otheralternatives may be more appropriate.


87

Provisions for other risks and charges

Sums recognised as provisions are based onmanagement's best estimates of the possible cost ofmeeting the present obligation at the balance sheet date.These estimates are based on the assumptions consideredmost appropriate by management. However, in the eventthat other assumptions had been considered, a differentimpact on the company's results could have occurred.

Impairment of non-current assets

Tangible assets are revised for impairment wheneverthere are facts or circumstances that indicate that theirnet value may not be recoverable. The Board of Directorsis of the understanding that, at 31 December 2015, thereare no events or circumstances that could lead to theexistence of any impairment indicators, in particular withregard to ongoing investment projects, such as the Monetand SACS submarine cables.

Taxes on Profits

There are a number of transactions and calculations wherethe final value of tax payable is difficult to assess during anormal business cycle. Other interpretations andestimates could lead to a different amount for the taxpayable on current profits that is recorded for the year.

In Angola, the tax authorities are entitled to review thecompany's determination of its taxable earnings for aperiod of five years. As a result, it is possible thatadditional taxes may be assessed as a result of differencesin the interpretation of tax laws.

The company recognises liabilities for additional taxassessments that may arise from reviews by the taxauthorities. When the final result of these estimates isdifferent from the values initially recorded, the differenceswill have an impact on income tax for the period in whichthe discrepancies are identified.

3. CHANGES TO ACCOUNTING POLICIES

There have been no changes to the accounting policiesadopted by the company in the 2015 financial yearcompared with the previous year.

Annual Report 2015


Notes to the Balance Sheet

4. TANGIBLE ASSETS

4.1 COMPOSITION

The composition of the “Tangible assets” item at 31 December 2015 and 2014 was as follows:

88

Items Gross valueAccumulated

depreciationNet Value

Period ended in 2015

Land and natural resources 180,419,029 (7,339,078) 173,079,951

Buildings and other constructions 8,304,518,513 (1,033,538,872) 7,270,979,641

Basic equipment 535,604,143 (107,126,307) 428,477,836

Loading and transportation equipment 142,174,450 (102,284,725) 39,889,725Administrative equipment 262,828,679 (71,242,639) 191,586,041

Other tangible assets 4,750,020 (791,069) 3,958,952

Construction in progress 3,540,100,705 - 3,540,100,705

Total 12,970,395,540 (1,322,322,689) 11,648,072,851


Land and natural resources 180,419,029 (3,669,539) 176,749,490

Buildings and other constructions 8,304,833,705 (710,658,680) 7,594,175,026Basic equipment 294,103,428 (53,081,531) 241,021,897

Loading and transportation equipment 116,227,050 (70,440,522) 45,786,528

Administrative equipment 249,989,280 (30,962,659) 219,026,621

Other tangible assets 2,077,223 (431,687) 1,645,536Construction in progress 2,119,071,739 - 2,119,071,739

Total 11,266,721,454 (869,244,617) 10,397,476,838

Annual Report 2015


4.2 CHANGES IN GROSS VALUE DURING THE YEAR

During the year ended 31 December 2015, the changes in the gross value of tangible assets were as follows:

89

Items Initial Balance Increases Reclassification Transfers Final balance

Period ended in 2015Land and natural resources 180,419,029 - - - 180,419,029Buildings and other constructions 8,304,833,705 - (336,501,902) 336,186,709 8,304,518,512Basic Equipment 294,103,428 2,298,400 - 239,202,315 535,604,143Loading and transportation equipment 116,227,050 25,947,400 - - 142,174,450Administrative equipment 249,989,280 13,332,733 (493,333) - 262,828,679Other tangible assets 2,077,223 11,639,230 - (8,966,432) 4,750,021Construction in progress 2,119,071,739 1,987,451,558 - (566,422,592) 3,540,100,705Total 11,266,721,454 2,040,669,320 (336,995,235) - 12,970,395,540

Period ended in 2014Land and natural resources 180,419,029 - - - 180,419,029Buildings and other constructions 8,289,542,487 15,291,218 - - 8,304,833,705Basic equipment 261,426,582 32,676,846 - - 294,103,428Loading and transportation equipment 116,227,050 - - - 116,227,050Administrative equipment 36,067,010 213,922,270 - - 249,989,280Other tangible assets 2,031,623 45,600 - - 2,077,223

Construction in progress 564,357,035 1,554,714,704 - - 2,119,071,739Total 9,450,070,816 1,816,650,638 - - 11,266,721,454

Annual Report 2015


The "Buildings and other constructions" heading includes the investment in the WACS (West Africa Cable System)submarine fibre optic cable, which entered into service in 2013. This heading also includes investments relating toAngonap and the Sangano station. In 2015, the WACS submarine cable upgrade was carried out. This constitutesthe main amount transferred from ongoing investment to firm investment, to the value of 336,187 thousandkwanzas. The 336,502 thousand kwanzas reduction relates to the WACS submarine cable consortium due to sale ofshares to Camtel (Cameroon), which joined the consortium by acquiring shares from all the members in proportionto their respective ownership interests.

The "Basic equipment" heading relates to investment in transmission equipment, particularly Backhaul, whichensures the land connection between the Sangano terminal station and Angonap in Talatona. In 2015, the maininvestments relate to the purchase of IP Core Edge equipment and the installation of the corporate network in theDolce Vita building.

The "Loading and transportation equipment" heading relates to the acquisition of transport means required by thecompany. In 2015, a new vehicle was purchased, bringing the fleet total to 23 vehicles.

The "Administrative equipment" heading includes investment in a range of information equipment and officefurniture for the Cellwave and Dolce Vita buildings. In 2015, the increases relate to information equipment for theDolce Vita building (NOC).

The composition of the "Construction in Progress" item at 31 December 2015 and 2014 was as follows:

The investment in the Monet cable relates to the initial design and preparation costs, project management, and thecompletion of 28% of the project, which is aimed at constructing a fibre optic submarine cable between Brazil andthe United States of America.

90

Items 2015 2014

Monet 2,849,184,703 1,443,468,479

SACS 562,661,149 314,254,926

Angonap 19,017,207 234,293,071

WACS - 76,495,731

Backhaul 55,694,729 50,559,531

Landing station - Fortaleza 38,124,524 -

Others 15,418,393 -

Total 3,540,100,705 2,119,071,738

Annual Report 2015


The investment in SACS relates to the initial design and preparation costs, as well as management of the project,which is aimed at constructing a fibre optic submarine cable between Angola and Brazil.

The investment in Backhaul relates to the costs incurred in implementing the 2nd phase of this project, aimed atincreased capacity and improved availability.

The main investments under "others" relate to Angonix equipment (Power Edge, 12,440,263 kwanzas).

4.3 CHANGES IN ACCUMULATED DEPRECIATION DURING THE YEAR

The land and natural resources value relates to surface rights for the land at the Sangano station and the Angonap station in Talatona. The depreciation corresponds to the number of years granted under the surface rights.

91

Items Initial balance Supplement Reclassification Transfers Final balance

Period ended in 2015Land and natural resources 3,669,539 3,669,539 - - 7,339,078Buildings and other constructions 710,658,680 322,880,192 - - 1,033,538,872Basic equipment 53,081,531 54,044,776 - - 107,126,307Loading and transportation equipment 70,440,522 31,844,202 - - 102,284,724Administrative equipment 30,962,659 40,279,980 - - 71,242,639Other tangible assets 431,687 359,382 - - 791,069Total 869,244,618 453,078,071 - - 1,322,322,689

Period ended in 2014Land and natural resources - 3,669,539 - - 3,669,539Buildings and other constructions 380,355,651 330,303,029 - - 710,658,680Basic equipment 23,720,260 29,361,271 - - 53,081,531Loading and transportation equipment 31,698,174 38,742,348 - - 70,440,522Administrative equipment 5,301,559 25,661,100 - - 30,962,659Other tangible assets 223,071 208,616 - - 431,687Total 441,298,715 427,945,903 - - 869,244,618

Annual Report 2015


5. INTANGIBLE ASSETS

5.1 COMPOSITION

At 31 December 2015 and 2014, the composition of the “Intangible assets” item was as follows:

5.2 CHANGES IN GROSS VALUE DURING THE YEAR

During the year ended 31 December 2015, the changes in the gross value of intangible assets were as follows:

The increases in 2015 relate to the upgrade of SAP software and the Oracle Fusion HCM solution, which were notfully operational at 31 December 2015.

92

Items Gross valueAccumulated

amortisationNet Value


Other intangible assets 153,641,530 (36,929,072) 116,712,458

Construction in progress 63,710,116 - 63,710,116

Total 217,351,647 (36,929,072) 180,422,574


Other intangible assets 94,846,066 (8,726,366) 86,119,699

Total 94,846,066 (8,726,366) 86,119,699

Items Initial balance Increases Decreases Final balance

Period ended in 2015Other intangible assets 94,846,066 58,795,465 - 153,641,531Construction in progress - 63,710,116 - 63,710,116Total 94,846,066 122,505,581 - 217,351,647

Period ended in 2014Other intangible assets 3,439,409 91,406,657 - 94,846,066Total 3,439,409 91,406,657 - 94,846,066

Annual Report 2015


5.3 CHANGES IN ACCUMULATED AMORTISATION DURING THE YEAR

During the year ended 31 December 2015, the changes in accumulated amortisation were as follows:

6. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

6.1 COMPOSITION

At 31 December 2015 and 2014, the “Investments in subsidiaries and associates” item had the followingbreakdown:

Within the context of investment in the Monet and SACS submarine cables, at the end of 2014 the companyAngola Cables Holding LTDA. was incorporated. This company has no relevant activity for the current period.

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Other intangible assets 8,726,366 28,202,706 - 36,929,072

Total 8,726,366 28,202,706 - 36,929,072


Other intangible assets 955,391 7,770,975 - 8,726,366

Total 955,391 7,770,975 - 8,726,366

ItemsInitial

balanceIncreases Decreases

Final

balance

Other companies

Equity holdings - 101,482,600 - 101,482,600

Total - 101,482,600 - 101,482,600

Associates

Associate accounts

Equity Own results

%

sharehol

ding

Amounts held

Gross

amount

recorded

Angola Cables Holding LTDA Headquarters in Rio de Janeiro 74,782,347 (21,344,605) 99.99% 101,482,600 101,482,600

Total 74,782,347 (21,344,605) 99.99% 101,482,600 101,482,600

Annual Report 2015


9. OTHER NON-CURRENT ASSETS AND ACCOUNTS RECEIVABLE

9.1 COMPOSITION

At 31 December 2015 and 2014, the “Accounts receivable” heading had the following breakdown:

In 2015, the company reclassified balances with shareholder customers, moving them from the “Other Debtors” tothe “Customers – current” item.

The "State and other public entities" heading relates to customer holdbacks, in accordance with Law 19/14, thevalue of which is tax deductible for the following five financial years.

9.2 SUPPLIERS, DEBIT BALANCE

At 31 December 2015 and 2014, the “Suppliers, debit balance” item essentially relates to “Suppliers – Invoicereceipt and checking” and basically involves invoices from suppliers whose service has not yet been provided orfrom whom Angola Cables has requested clarification.

94

Items Current Non current Total


Customers - current

Non-group customers 243,669,141 - 243,669,141

Group customers (Note 40) 2,387,478,855 - 2,387,478,855

State 45,279,401 - 45,279,401

Suppliers – debit balance 36,151,519 - 36,151,519

Other debtors 13,377 - 13,377

Total 2,712,592,293 - 2,712,592,293


Customers - current

Non-group customers 123,984,822 - 123,984,822

Group customers (Note 40) 29,828,212 - 29,828,212

State 45,279,401 - 45,279,401

Personnel 4,902,000 - 4,902,000

Suppliers – debit balance 852,000 - 852,000

Other debtors 2,058,221,068 73,267,388 2,131,488,457

Total 2,263,067,504 73,267,388 2,336,334,892

Annual Report 2015


9.3 OTHER DEBTORS, CURRENT

At 31 December 2015 and 2014, the "Other debtors" heading comprised the following:

In 2014, the values under the “Other debtors” item related to income from the shareholder wholesale agreementthat was in force between 2012-2014. As previously mentioned, these balances were reclassified in 2015 andincluded under the “Customers – Current Account” item.

9.4 OTHER DEBTORS, NON-CURRENT

At 31 December 2015 and 2014, the "Other debtors – non-current" item comprised the following:

The “Other debtors – non-current” item relates to the contribution of capital for the WACS T segment, with respectto the terminal stations in which the Company activated circuits. In 2015, the value under this item was written offand booked under “Other non-operating income” bearing in mind that the value of the asset depends on theactivation the circuits by other members of the WACS consortium, which is out of the Company's control.

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Other debtors - current 2015 2014

Angola Telecom - 1,235,865,934

MS Telcom - 40,280,814

Movicel - 151,078,824

Startel - 85,539,413

Amounts due from the 4th Quarter of 2014 - 545,456,083

Others 13,377 -

Total 13,377 2,058,221,068

Other debtors - non-current 2015 2014

WACS Activations - 73,267,388

Total - 73,267,388

Annual Report 2015


10. CASH AND CASH EQUIVALENTS

10.1 COMPOSITION

The “Cash and cash equivalents” item records deposits held by the company in banking institutions at 31December 2015 and 2014.

The committed appropriations correspond to 1,177,182 thousand kwanzas relating to supplementary capital fromshareholders for funding of the SACS and Monet submarine cable construction projects.

11. OTHER CURRENT ASSETS

11.1 COMPOSITION

At 31 December 2015 and 2014, the "Other current assets" item comprised the following:

The "Deferred costs" item relates to sums paid in advance with respect to property rents, insurance, and others,the amounts of which will be recognised in future financial years.

96

Items 2015 2014

Demand deposits 1,305,917,522 727,964,522

Cash 823,816 1,243,318

Deposit of committed appropriations 1,177,181,933 2,982,774,995

Total 2,483,923,270 3,711,982,835

Items 2015 2014

Deferred costs 43,004,139 103,156,536

Total 43,004,139 103,156,536

Annual Report 2015


12. SHARE CAPITAL

12.1 COMPOSITION OF SHARE CAPITAL

At 31 December 2015, the company's share capital, amounting to Akz 390,000,000.00 or USD 5,000,000.00 wasfully subscribed and paid up. The Company's capital is broken down as follows:

The share capital is divided into 1,000,000 shares, each with a value of Akz 390.00, which are held as follows:

12.2 COMPOSITION OF SUPPLEMENTARY CAPITAL CONTRIBUTIONS

At 31 December 2015, the "Supplementary capital contributions" heading comprised the following:

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Entities 2015 2014

Angola Telecom - E.P 6,691,200,000 6,691,200,000Unitel, S.A. 4,067,200,000 4,067,200,000Mercury - Serviços de Telecomunicações, S.A. 1,180,800,000 1,180,800,000Movicel - Telecomunicações, Lda. 540,000,000 540,000,000Mundo Startel, S.A. 272,206,741 261,846,741Total 12,751,406,741 12,741,046,741

Entities % heldNumber of

SharesValue

Angola Telecom - E.P. 51.00% 510,000 198,900,000

Unitel, S.A. 31.00% 310,000 120,900,000

Mercury - Serviços de Telecomunicações, S.A. 9.00% 90,000 35,100,000

Movicel - Telecomunicações, Lda. 6.00% 60,000 23,400,000

Mundo Startel, S.A. 3.00% 30,000 11,700,000

Total 100.00% 1,000,000 390,000,000


Share capital 390,000,000 - - 390,000,000

Supplementary capital contributions 12,741,046,741 10,360,000 - 12,751,406,741

Total 13,131,046,741 - - 13,141,406,741

Annual Report 2015


12.3 CHANGES DURING THE YEAR

During the year ended 31 December 2015, changes under the “Share Capital” item was as follows:

The increases recorded under the "Supplementary capital contributions" item relate to capital payments by theshareholder Mundo Startel, S.A., as part of their commitment towards funding of the WACS submarine cable.

The overall amount of “Supplementary capital contributions” relates to the commitment towards funding theWACS submarine cable, up to a limit in kwanzas equivalent to 90,000,000 US dollars, and the SACS and Monetsubmarine cables, up to a limit in kwanzas equivalent to 40,000,000 US dollars.

At 31 December 2015, the amount of supplementary capital to be paid was 368,089,259 kwanzas, as follows:

The amount of supplementary capital to be paid by the shareholder Movicel relates to its commitment towardsfunding the SACS and Monet submarine cables, while the amount of supplementary capital to be paid by theshareholder Mundo Startel relates to its commitment towards funding the WACS submarine cable.

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Entities Value

Movicel - Telecomunicações, Lda. 246,864,000

Mundo Startel 121,225,259

Total 368,089,259

Entities Initial balance Increases Decreases Final balance

Angola Telecom - E.P 6,691,200,000 - - 6,691,200,000

Unitel, S.A. 4,067,200,000 - - 4,067,200,000

Mercury - Serviços de Telecomunicações, S.A. 1,180,800,000 - - 1,180,800,000

Movicel - Telecomunicações, Lda. 540,000,000 - - 540,000,000

Mundo Startel, S.A. 261,846,741 10,360,000 - 272,206,741

Total 12,741,046,741 10,360,000 - 12,751,406,741

Annual Report 2015


14. RETAINED EARNINGS

At 31 December 2015, the "Retained earnings" item comprised the following:

15. MEDIUM AND LONG-TERM LOANS

At 31 December 2015, the "Medium- and long-term loans" item comprised the following:

The values under the "Medium- and long-term loans" item relate to sums paid by shareholders in excess of theirshare of the maximum supplementary capital limit of 9,000,000,000 kwanzas (WACS), which are recognised asshareholder loans.

These loans earn annual interest corresponding to the 6-month USD LIBOR rate, plus 3%. At 31 December 2015,the due interest totalled 389,744 thousand kwanzas. In 2015, the due interest was recognised under this item (seenotes 18, 31, and 33), which includes corrections relating to previous years to the value of 17,000 kwanzas and thecancellation of a debit note from a shareholder booked in the previous year to the approximate value of 17,000Kwanzas, the cumulative effect of which did not affect the income statement.

99

Medium- and long-term loans 2015

CapitalAngola Telecom - E.P 708,663,403Unitel, S.A. 1,408,779,690Mercury - Serviços de Telecomunicações, S.A. 581,453,327Movicel - Telecomunicações, Lda. 621,476,047InterestAngola Telecom - E.P 116,753,157Unitel, S.A. 172,491,289Mercury - Serviços de Telecomunicações, S.A. 74,332,411Movicel - Telecomunicações, Lda. 26,167,466

Total 3,710,116,790


Results from the previous financial year 1,871,456,801 - 196,495,686 2,067,952,487

Total 1,871,456,801 - 196,495,686 2,067,952,487

Annual Report 2015


18. PROVISIONS FOR OTHER RISKS AND CHARGES

At 31 December 2015 and 2014, the "Provisions for other risks and charges" heading comprised the following:

19. ACCOUNTS PAYABLE

19.1 COMPOSITION

At 31 December 2015 and 2014, the “Accounts payable” item related to current balances and had the following breakdown:

100

Items Current Non current Total


Suppliers, current accountNon-group suppliers 676,430,587 - 676,430,587Group suppliers (Note 40) 138,750,507 - 138,750,507

The state and other public entities 162,811,617 - 162,811,617Customers – credit balance 10,571,501 - 10,571,501Total 988,564,212 - 988,564,212


Suppliers, current accountNon-group suppliers 1,168,543,610 - 1,168,543,610Group suppliers 213,446,743 - 213,446,743

The state and other public entities 30,115,645 - 30,115,645Customers – credit balance 1,142,400 - 1,142,400Total 1,413,248,398 - 1,413,248,398



Tax provisions - 251,206,242 - 251,206,242Provisions for other risks and chargesInterest on shareholder loans 275,902,303 - (275,902,303) -Total 275,902,303 251,206,242 (275,902,303) 251,206,242

Period ended in 2014Provisions for other risks and chargesInterest on shareholder loans 178,442,465 97,459,838 - 275,902,303Total 178,442,465 97,459,838 - 275,902,303

Annual Report 2015


19.2 THE STATE AND OTHER PUBLIC ENTITIES

At 31 December 2015 and 2014, the "State and other public entities" heading comprised the following:

19.3 CUSTOMERS - CREDIT BALANCE

At 31 December 2015 and 2014, the "Customers - credit balance" heading comprised the following:

21. OTHER CURRENT LIABILITIES

At 31 December 2015 and 2014, the "Other current liabilities" heading comprised the following:

101

Items 2015 2014

Deferred income 366,654,901 365,649,996

Supplier expenses 111,768,526 142,728,990

Remuneration expenses 109,034,166 54,074,394

Accounts payable 8,011,146 -

Deferred favourable exchange rate balances - -

Total 595,468,739 562,453,380

Customers balances 2015 2014

Banco de Investimento Rural 1,142,400 1,142,400

Banco Fomento Angolano 9,429,101 -

Total 10,571,501 1,142,400

The state and other public entities 2015 2014

Excise Duty 127,916,796 6,983,256

Withholding tax (Law 19/14) 13,794,181 7,686,866

Labour income tax 8,103,200 4,860,354

Social security contributions 6,923,634 3,557,247

Stamp duty 5,661,830 6,817,801

Property tax 411,976 210,120

Total 162,811,617 30,115,644

Annual Report 2015


102

The “Deferred income” item relates to sums billed to customers for services to be provided in future financialyears, including the sale of IRU (“Indefeasible Right of Use”), the income from which spans over a period of 15years.

The “Supplier expenses” item relates to sums set aside for current debt to suppliers with respect to costs in 2015,the invoices for which will be received by the company in 2016. The estimates essentially relate to sums due toINACOM and maintenance and repair costs.

The “Remuneration expenses” item relates to sums set aside for remunerations to be paid in 2016.

Notes to the income statement

23. PROVISION OF SERVICES

23.1 PROVISION OF SERVICES BY MARKET

At 31 December 2015, the “Provision of Services” item had the following breakdown:

23.2 PROVISION OF SERVICES BY ACTIVITY

For the years ended 31 December 2015 and 2014, this item comprised the following:

Items 2015 2014

WACS 3,316,840,095 2,316,870,681

Internet 610,680,934 118,079,680

Backhaul 174,785,675 58,562,367

Co-location 66,217,550 27,640,103

Last-mile 44,131,984 16,335,226

Others 1,794,100 450,000

Total 4,214,450,338 2,537,938,057

Items 2015 2014

Domestic market 3,430,880,484 2,011,322,930

External market 783,569,854 526,615,127

Total 4,214,450,338 2,537,938,057

Annual Report 2015


For the years ended 31 December 2015 and 2014, the "WACS" services heading comprised the following:

24. OTHER OPERATING REVENUES AND GAINS

At 31 December 2015 and 2014, the “Other operating revenues and gains” item had the following breakdown:

The "WACS landing provider (Sangano)" item relates to services provided to the WACS consortium at the Sangano terminal station for the landing of the fibre optic submarine cable. The sums correspond to contributions towards the operating costs of the station, which are approved annually by the consortium.

28. STAFF EXPENSES

At 31 December 2015 and 2014, the "Staff Expenses" item comprised the following:

103

Items 2015 2014

WACS landing provider (Sangano) 98,719,856 84,672,390

Others 16,151,422 -

Total 114,871,278 84,672,390

Items 2015 2014

Shareholder customers 2,996,239,137 1,784,338,334

Other customers 320,600,958 532,532,346

Total 3,316,840,095 2,316,870,681

Items 2015 2014

Remuneration - staff 598,481,701 351,137,059

Remuneration - statutory bodies 149,436,698 118,836,800

Remuneration - related expenses 38,129,400 26,630,135

Training 19,163,127 29,949,742

Work accident and disease insurance 8,265,019 5,990,763

Other staff expenses 107,281,413 1,047,472

Total 920,757,358 533,591,972

Annual Report 2015


The "Other staff expenses" item relates to the cost of health insurance, which is provided to all employees, andsubsistence allowances provided to employees for business trips. The increase under this item compared with 2014is mainly due to subsistence allowances provided to employees during the process of incorporating Angola CablesHolding LTDA in Brazil.

The average number of employees was 84 in 2015 and 72 in 2014. The increase in the number of employees andthe salary review carried out in 2015 explain the significant increase in staff costs.

29. DEPRECIATION

At 31 December 2015 and 2014, the "Depreciation" item comprised the following:

30. OTHER OPERATING EXPENSES AND LOSSES

30.1 COMPOSITION

At 31 December 2015 and 2014, the "Other operating expenses and losses" item comprised the following:

104

Items 2015 2014

Subcontracts 348,032,430 273,091,117

Supplies and third-party services (Note 30.2) 1,705,833,365 1,555,859,488

Taxes 43,303,134 16,575,202

Total 2,097,168,929 1,845,525,807

Items 2015 2014

Tangible assets (Note 4)

Buildings and other constructions 322,880,192 330,303,029

Administrative equipment 40,279,980 25,661,100

Basic equipment 54,044,776 29,361,271

Loading and transportation equipment 31,844,203 38,742,348

Land and natural resources 3,669,539 3,669,539

Other tangible assets 359,382 208,616

Intangible assets (Note 5)

Other intangible assets 28,202,706 7,770,975

Total 481,280,778 435,716,878

Annual Report 2015


For the years ended 31 December 2015 and 2014, the "Subcontracts" heading comprised the following:

The "Connectivity" item relates to the lease of third-party transmission circuits, which are necessary to ensureservice provision to customers, in particular the lease of dark fibre between Sangano and Angonap and the lease oflocal access circuits (Last Mile) in the home market and abroad.

30.2 SUPPLIES AND THIRD-PARTY SERVICES

For the years ended 31 December 2015 and 2014, the "Supplies and third-party services" item comprised the following:

105

Items 2015 2014

Fees 628,109,227 541,183,254

Maintenance and repair 342,488,279 287,111,313

Travelling and subsistence allowances 139,861,166 145,505,593

Leases and rentals 114,277,983 92,819,437

Maintenance and repair materials 78,805,401 286,318

Other services - INACOM Licenses 72,289,684 71,555,637

Advertising and publicity 71,309,128 114,505,717

Technical support 64,565,104 106,309,832

Communication 40,452,243 73,959,050

Fuel and other fluids 37,802,939 28,517,286

Monitoring and security services 34,415,733 31,826,576

Commission fees 22,681,761 12,716,998

Cleaning, hygiene and comfort 15,238,879 10,905,142

Insurance 13,072,023 9,340,972

Office materials 8,713,293 6,629,697

Water 7,678,626 6,876,486

Representation expenses 3,556,927 4,578,802

Fast-wearing tools and appliances 3,491,063 8,218,180

Books and tecnical documentation 1,832,800 536,681

Legal services 1,074,555 2,377,209

Electricity 602,000 99,308

Protection, security, and comfort materials 367,525 -

Other supplies 3,147,026 -

Total 1,705,833,366 1,555,859,488

Item 2015 2014

Connectivity 348,032,430 273,091,117

Total 348,032,430 273,091,117

Annual Report 2015


The "Fees" item relates to expenses from financial (in 2014 only), commercial, legal, and business consultancyservices, as well as financial auditing, for the support to the company's activity and development.

The "Maintenance and repair" item relates to costs arising from maintaining the technical facilities, namely theSangano station and Angonap, as well as the maintenance and repair of the WACS fibre optic submarine cable.

The "Travelling and subsistence allowances" heading relates to travel and accommodation costs of business trips.

The "Advertising and publicity" item relates to the cost of promoting the company's services and image, including theparticipation in international telecommunications fairs.

The "Technical support" item relates to the cost of specialised technical services for the operation and maintenanceof the technical facilities, namely Angonap and the Sangano station.

31. FINANCIAL RESULTS

At 31 December 2015 and 2014, the "Financial Results" item comprised the following:

The "Bank services" heading relates to commission fees for international payments, as well as money transfer andadministration fees, which are charged by banks.

The "Unfavourable exchange rate balances" heading relates to exchange rate variations and commission fees for thepurchase of foreign currency (USD), for international payments.

The "Bank interest" item relates to income from short-term cash investments.

The "Favourable exchange rate balances" heading relates to the revaluation of assets and liabilities in foreigncurrencies, taking into account the exchange rate changes between the moment of acquisition or booking and theend of the financial year.

The "Interest on shareholder loans" item concerns interest due on shareholder loans, which in previous years cameunder the “Other non-operating income" item (note 33).

106

Items 2015 2014

Financial income

Favourable exchange rate balances 374,908,004 123,148,885

Interest on late payment – receivables - 130,553

Bank interest 78,515,357 9,955,014

Cash discounts - 950,205

453,423,361 134,184,656

Financial costs

Unfavourable exchange rate balances 331,127,038 17,514,826

Interest on shareholder loans 96,809,088 -

Bank services 10,917,361 6,448,537

438,853,488 23,963,363

Total 14,569,873 110,221,294

Annual Report 2015


33. OTHER NON-OPERATING INCOME

At 31 December 2015 and 2014, the "Other non-operating income" item comprised the following:

The "Interest on shareholder loans" heading concerns interest due on shareholder loans, in accordance with theterms and conditions of the company's shareholders' agreement.

35. INCOME TAX

In the year ended 31 December 2015, no provision for corporate income tax was recorded, since the company isentitled to a tax credit due to recorded losses in previous financial years.

Other notes relating to the financial position and operatingresults

36. COMMITMENTS NOT REFLECTED UNDER LIABILITIES

At 31 December 2015, the company has a bank guarantee in the amount of USD 42,443,439 for the Monetinvestment project. This guarantee is provided by the BFA bank to the supplier Tyco Electronics SubseaCommunication LLC (the Monet submarine cable supplier). The company bears a 3% per annum commission fee onthe guaranteed sum. This fee is capitalised since it is considered part of the project cost due to the fact that suchguarantee is a requirement from the supplier.

107

Items 2015 2014

Other non-operating income

Stock gains 2,649,625 -

Supplier claims 18,099,144 -

20,748,769 -

Other non-operating costs

Provisions

Other risks and charges (Note 18) 251,206,242 -

Corrections relating to previous financial years 63,539,459 -

Interest on shareholder loans - 114,492,769

314,745,701 114,492,769

Total (293,996,932) (114,492,769)

Annual Report 2015


38. EVENTS AFTER THE BALANCE SHEET DATE

There have been no events after the balance sheet date that might alter the presentation of or the information contained in these financial statements.

40. TRANSACTIONS WITH RELATED ENTITIES

At 31 December 2015 and 2014, the company held significant balances with related entities. The details of these balances at those dates were as follows:

108

31 December 2015

Entity

Assets Liabilities

Other debtors

(Note 9)

Customers,

current

accounts

(Note 9)

Total assets

Suppliers,

current

accounts

(Note 19)

Medium and

long-term

loans (Note 15)

Interest

accrualsTotal liabilities

Angola Telecom - E.P - 1,624,913,286 1,624,913,286 125,377,352 708,663,403 116,753,157 834,040,755

Unitel, S.A. - 184,474,413 184,474,413 7,267,673 1,408,779,690 172,491,290 1,416,047,363

Mercury - Serviços de Telecomunicações, S.A. - 216,321,800 216,321,800 - 581,453,327 74,332,412 581,453,327

Movicel -Telecomunicações, Lda. - 226,867,945 226,867,945 - 621,476,047 26,167,466 621,476,047

Mundo Startel, S.A. - 134,901,411 134,901,411 6,105,482 - - 6,105,482

Total - 2,387,478,855 2,387,478,855 138,750,507 3,320,372,467 389,744,324 3,459,122,974

31 December 2015

Entity

Equity

Share capital

(Note 12.1)

Supplementary

Capital

Contributions

(Note 12.2)

Total equity

Angola Telecom - E.P 198,900,000 6,691,200,000 6,890,100,000Unitel, S.A. 120,900,000 4,067,200,000 4,188,100,000Mercury - Serviços de Telecomunicações, S.A. 35,100,000 1,180,800,000 1,215,900,000Movicel - Telecomunicações, Lda. 23,400,000 540,000,000 563,400,000Mundo Startel, S.A. 11,700,000 272,206,741 283,906,741

Total 390,000,000 12,751,406,741 13,141,406,741

31 December 2015

Entity

Transactions during the year

Provision of

servicesSubcontracts

Supplies and

services

Interest on

loans

Angola Telecom - E.P 199,996,202 125,429,852 - 24,319,828

Unitel, S.A. 1,528,495,228 292,789,902 - 48,262,110

Mercury - Serviços de Telecomunicações, S.A. 690,902,507 444,893,940 - 19,919,484


Mundo Startel, S.A. 67,104,000 6,563,651 -

Total 2,980,490,037 869,677,344 - 113,792,009

Annual Report 2015

31 December 2014

Entity

Assets Liabilities

Other debtors

(Note 9)

Customer

current

accounts

(Note 9)

Total assets

Supplier,

current

accounts

(Note 19)

Medium and

long-term

loans (Note

15)

Total

liabilities

Angola Telecom - E.P 1,235,865,934 19,480,730 1,255,346,664 9,670,549 708,663,403 718,333,952Unitel, S.A. - - - 9,206,829 1,408,779,690 1,417,986,519Mercury - Serviços de Telecomunicações, S.A. 40,280,814 8,768,550 49,049,364 177,048,050 581,453,327 758,501,377Movicel - Telecomunicações, Lda. 151,078,824 - 151,078,824 17,032,931 621,476,047 638,508,978Mundo Startel, S.A. 85,539,413 1,578,932 87,118,345 488,384 - 488,384

Total 1,512,764,985 29,828,212 1,542,593,197 213,446,743 3,320,372,467 3,533,819,210

31 December 2014

Entity

Equity

Share capital

(Note 12.1)

Supplementary

Capital

Contributions

(Note 12.2)

Total equity

Angola Telecom - E.P 198,900,000 6,691,200,000 6,890,100,000Unitel, S.A. 120,900,000 4,067,200,000 4,188,100,000Mercury - Serviços de Telecomunicações, S.A. 35,100,000 1,180,800,000 1,215,900,000Movicel - Telecomunicações, Lda. 23,400,000 540,000,000 563,400,000Mundo Startel, S.A. 11,700,000 261,846,741 273,546,741

Total 390,000,000 12,741,046,741 13,131,046,741

31 December 2014

Entity

Transactions during the year

Provision of

servicesSubcontracts

Supplies and

services

Non-operating

costs

Angola Telecom - E.P 914,812,551 - 7,623,112 24,436,064

Unitel, S.A. 560,344,884 79,218,000 47,394,010 48,577,408

Mercury - Serviços de Telecomunicações, S.A. 173,711,450 166,165,702 - 20,049,619


Mundo Startel, S.A. 57,130,150 - 7,152,243 -

Total 1,814,320,689 245,383,702 62,169,364 114,492,769


109

Annual Report 2015

110

Certificationof the Report and Accounts 2015

THE BOARD OF DIRECTORS

President:

Vice-President:

Member:

Member:

Member:

Member:

Member:

ACCOUNTANT OFFICER

111

Annexes

113

Annual Report 2015

114

Opinion of the External Auditor

Independent Auditor’s Report

We audited the attached financial statements for ANGOLA CABLES S.A. ("Company"),

which comprised the balance sheet at 31 December 2015 (showing a total of Akz

17,169,498 thousand and total equity of Akz 11,624,142 thousand. This includes net

income of Akz 550,687 thousand), the Profit and Loss Statement by Nature, and the Cash

Flow Statement for the year ended on that date, as well as the Notes to the Accounts.

Board of Directors Responsibility for the Financial Statements

The Board of Directors is responsible for adequately preparing and presenting these

financial statements in accordance with the generally accepted accounting principles in

Angola and for the internal control it deems necessary for preparing the financial

statements without any materially relevant misstatements owing to fraud or error.

Auditor Responsibility

It is our responsibility to express an opinion on these financial statements based on our

audit, which was conducted in accordance with the International Standards on Auditing.

These regulations require us to comply with ethical requirements and carry out the audit

to reasonably ensure that the financial statements are free from materially relevant

misstatements. An audit involves carrying out procedures to provide audit evidence on the

amounts and disclosures contained in the financial statements. The procedures selected

depend on the auditor's judgement, including an assessment of the risk of misstatements

in the financial statements owing to fraud or error. Upon making these risk assessments,

the auditor considers the entity's internal control over the preparation and presentation of

the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not with the aim of expressing an opinion on the effectiveness of the

entity's internal control. An audit also involves assessing the suitability of the accounting

policies used and the reasonableness of accounting estimates made by the Board of

Directors, as well as the overall presentation of the financial statements.

Annual Report 2015

115

We are convinced that the audit evidence obtained is sufficient and appropriate,

providing us with a basis for our auditing opinion.

Opinion

In our opinion, the previously mentioned financial statements present a true and fair

view of the financial situation of ANGOLA CABLES, S.A. at 31 December 2015 and its

financial performance and cash flows relating to the financial year ended on that

date, in accordance with the generally accepted accounting principles in Angola.

Luanda, 20 May 2016

Ernst & Young Angola. Lda.

Represented by:

Rui Abel Serra Martins

Partner

Opinion of the External Auditor

Annual Report 2015

Glossary and Abbreviations

ACE – Africa Coast to Europe submarine cable thatconnects France to South Africa

Backhaul – fibre optic transmission systembetween the connection point to the main network(backbone) and the customer access point (forexample, between the Sangano station andAngoNAP).

Backbone – central element of atelecommunications network, with a largetransmission capacity, through which other segmentsof the network interconnect.

Colocation – category of services provided in a datacentre to host equipment and content.

CDN (Content Delivery Network) – Digitalcontent distribution network.

CLS (Cable Landing Station) – Station whereone end of the submarine cable (branch or trunk) isterminated and connected to the terrestrial network.

Data Centre – infrastructure for housing ICTequipment, ensuring high levels of capacity,connectivity, availability, and security.

Download – transfer of data from a remote serverto a local computer.

DWDM (Dense Wavelength-DivisionMultiplexing) – technology for increasing thevolume of communications (bandwidth) of an opticaltransmission medium.

EASSY (Eastern Africa Submarine CableSystem) – fibre optic submarine cable that connectsSouth Africa to Sudan.

EBITDA (Earnings Before Interest, Taxes,Depreciation and Amortisation) – an indicator ofa company’s financial performance, often used as aproxy for the earning potential of a business.

Developed Economies – countries with an above-average level of economic and social development,according to generally accepted criteria (e.g. percapita GDP, level of industrial development, and thehuman development index).

ERP (Enterprise Resource Planning) –accounting , financial, and human resourcesinformation system.

Ethernet – technology for local computer networks.

116

Exabyte – unit equal to 1,000 Petabytes (Petabyte –unit equal to 1,000 Terabytes; Terabyte – unit equalto 1,000 Gigabytes); byte isthe unitof 8 bits usedindigital communications.

IP (Internet Protocol) – communicationstechnology used bythe Internet.

ISP (Internet Service Provider) – provider ofaccesstothe Internet.

IXP (Internet Exchange Point) – infrastructurethat allowsthe exchange of traffic between ISPs.

Main One -submarine cable between PortugalandSouth Africa

Mbps – Megabits per second, unit of speed (orbandwidth)for digital communications.

MPLS (Multi Protocol Label Switching) –technology that increasesthe efficiencyof a digitalcommunicationsnetwork, combining variouscommunications standards (protocols)and allowingthe differentiated managementof service quality.

NOC (Networking Operations Centre) –managementand operations centre for atelecommunications network.

OECD (Organisationfor Economic Co-operationand Development) – withheadquartersin Paris.

Peering – connectionof two networksfor exchangingtraffic, usually free.

GDP – Gross Domestic Product

POP (Point of Presence) – Infrastructure throughwhich customers and other operators access anoperator's telecommunications network.

Annual Report 2015

Glossary and Abbreviations

p.p. – percentage points.

PTC – Pacific Telecommunications Council

RFS (Ready For Service) – date on which a newtelecommunications system is declared ready toenter into service.

Root Server – server that translates website namesinto IP addresses.

SACS (South Atlantic Cable System) – fibreoptic submarine cable between Sangano (Angola) andFortaleza (Brazil), belonging to Angola Cables.

SADC (Southern African DevelopmentCommunity) – economic community of southernAfrican countries.

SAP – market leader in the corporate software andapplications market, namely ERPs.

SAT-3 (South Atlantic 3/West AfricaSubmarine Cable) – submarine cable thatconnects Europe to Asia via South Africa.

Tbps – Terabits per second, unit of speed (orbandwidth) for digital communications (equal to 1million Mbps).

ICT – Information and CommunicationTechnologies.

WACS (Western Africa Submarine Cable) –submarine cable that connects South Africa toPortugal, extended to the United Kingdom.

117

Head OfficeLote Cellwave, 2º andarVia AL5, Zona XR6B - TalatonaLuanda - AngolaAS Number 37468

CLS SanganoPraia de Sangano,Município da Kissama, Luanda – Angola

Fortaleza CLSPraia do FuturoCeará, Brazil

AngonapAvenida Pedro Castro Van Dúnem Loy – Talatona Luanda – Angola

ContactsPhone: +244 227 360 006

[email protected]@angolacables.co.ao

www.angolacables.co.ao

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Annual - Angola Cables

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