We have modified the presentation of operating revenue and operating costs in the income statement. None of the introduced modifications have affected the amounts of revenue, costs, net profit for the period, EBITDA or total equity, presented earlier. For a detailed description of the changes made in the presentation of financial data refer to Note 8 in the financial statements for the financial year ended December 31, 2014.
Revenue
Revenue is derived from (i) retail sales, (ii) wholesale sales, (iii) sale of equipment, and (iv) other revenue sources.
Retail revenue
Retail revenue consists primarily of (i) monthly subscription fees paid by our pay digital television contract customers for programming packages, (ii) subscription fees paid by our contract customers for telecommunication services, (iii) fees for telecommunication services provided to our contract customers, which are not included in the subscription fee, (iv) fees for the lease of set-top boxes, (v) activation fees, (vi) penalties, and (vii) fees for additional services. The total revenue from pay digital television and telecommunication subscription fees depends on the number of customers and the number of services provided to them, as well as on the amount of monthly subscription fees paid for our programming and telecommunication packages and the amount of additional services provided to our customers in the given period. Activation fees are collected at the moment of activation and amortized over the life of the contract.
Wholesale revenue
Our wholesale revenue comprises:
(i) advertising and sponsorship revenue; (ii) interconnect revenue;
(iii) revenue from the sale of broadcasting and signal transmission services; and (iv) revenue from the sale of licenses, sublicenses and property rights.
Sale of equipment
Sale of equipment consists mostly of revenue from sale of set-top boxes, STB hard disk drives, antennas, Internet modems, tablets, laptops, routers, mobile handsets and accessories to our customers when they enter into agreements with us.
Other revenue
Other revenue sources consist primarily of revenue from the lease of premises and facilities, revenue from interest on installment plan purchase and other sales revenue.
Operating costs
Operating costs consist of: (i) content costs;
(ii) distribution, marketing, customer relation management and retention costs; (iii) depreciation, amortization, impairment and liquidation;
(iv) technical costs and cost of settlements with mobile network operators; (v) salaries and employee-related costs;
(vi) cost of equipment sold;
(vii) cost of debt collection services and bad debt allowance and receivables written off; and (viii)other costs.
Content costs
Content costs consist of:
(i) programming license costs;
(ii) costs of internal and external production.
Programming license costs include monthly license fees due to television broadcasters and distributors, license fees for materials broadcast on VOD and royalties due to collective copyright management organizations and the Polish Film Institute.
Costs of internal and external production include production costs for TV programs specifically produced by or for us, either under licenses from third parties or under our own licenses.
Distribution, marketing, customer relation management and retention cost
Distribution costs consist of (i) commissions due to our distributors and retail points of sale when they conclude sale or retention agreements with our customers for pay television and telecommunication services and (ii) costs of courier services, distribution of reception equipment and costs associated with services of our regional agents. Marketing expenses consist of expenses on TV and radio commercials, press, online and outdoor advertising, promotional activities and materials, as well as other expenses incurred to increase sales and brand recognition. Customer relation management and retention costs consist of mailing costs, call centre costs and other customer relation management costs.
Depreciation, amortization, impairment and liquidation
Depreciation, amortization, impairment and liquidation costs primarily consist of (i) depreciation of set-top boxes leased to our customers, (ii) depreciation of plant and equipment, (iii) amortization of intangible assets, including IT software, (iv) non- current assets impairment allowance, and (v) net value of disposed property, plant and equipment as well as intangible assets, no longer suitable for use.
Technical costs and cost of settlements with telecommunication operators
Technical costs and cost of settlements with telecommunication operators comprise: (i) telecommunications and IT infrastructure lease costs;
(ii) IT systems maintenance costs;
(iii) payments for the lease of satellite transponder capacity;
(iv) payments for the use of conditional access system based on the number of access cards; (v) cost of settlements with mobile network operators and interconnection charges; and (vi) other costs.
Salaries and employee-related costs
Salaries and employee-related expenses consist of salaries paid to employees under employment contracts (excluding salaries and social security contributions of factory employees, which are included in the costs of manufacturing of reception equipment and salaries and social security contributions relating to employees directly involved in the production of IT software) or project-specific contracts, managerial contracts, remuneration of our Supervisory Board members, social security costs and other employee benefits.
Cost of equipment sold
Cost of equipment sold relates mostly to set-top boxes, STB hard disk drives, antennas, Internet modems, routers, tablets, laptops, mobile handsets, smartphones and accessories that we sell to our customers.
Cost of debt collection services and bad debt allowance and receivables written off
In this group of costs we present: (i) bad debt recovery fees;
(ii) bad debt allowance and the cost of receivables written off; and (iii) gains and losses from the sales of liabilities.
Other costs
Key items of other costs include:
(i) the cost of SMART and SIM cards provided to customers; (ii) legal, advisory and consulting costs;
(iii) property maintenance costs; (iv) taxes and other charges; (v) warranty services costs; (vi) costs of trademark licenses; and (vii) other costs.
Other operating income/costs, net Other operating income/costs consist of:
(i) inventory impairment write-downs/reversals;
(ii) and other operating revenue/costs, not derived in the ordinary course of business. Gains and losses on investment activities, net
Gains and losses on investment activities, net include interest income on invested funds, accrued interest, dividends income, results on the disposal of available-for-sale financial instruments, fair value gains/losses on financial instruments at fair value through profit or loss, net foreign currency gains/losses (other than on valuation of senior notes), impairment losses recognized on financial assets, unwinding of the discount on provisions.
Finance costs
Finance costs comprise interest expense on borrowings (including bank loans and Senior Notes), foreign exchange gains/losses on Senior Notes, bank and other charges on borrowings, guarantee fees relating to the indebtedness resulting from SFA and Indenture as well as discount on license liabilities.