38 Service concession arrangements

Satellic NV, Machelen, Belgium, is a fully consolidated subsidiary of ­Deutsche Telekom and on July 25, 2014 signed a contractual arrangement with Viapass, the public agency responsible for toll collection in Belgium, for the set-up, operation, and financing of an electronic toll collection system. After Viapass accepted the system on March 30, 2016, the set-up phase was completed on March 31, 2016. The operation phase that follows will have a duration of twelve years, with the additional option for Viapass to extend the term three times by one year. Satellic has no entitlement to the toll revenue collected but will receive contractually agreed fees for setting up and operating the system. Viapass is authorized to terminate the arrangement giving notice of six months with payment of reasonable compensation. In the event of regular or premature termination of the agreement, Satellic has an obligation to hand over to Viapass, on request, material assets for the operation of the toll collection system that have not yet passed to the ownership of Viapass; in such an event, however, the software platform for toll collection would not be handed over to Viapass. The agreement was classified as a service concession arrangement within the meaning of IFRIC 12. During the phase of setting up the system, revenue from long-term construction contracts was recognized pursuant to IAS 11 and a financial asset carried in accordance with IFRIC 12. The percentage of completion was determined as the percentage of cost incurred up until the reporting date relative to the total estimated cost (cost-to-cost method). As a result of the completion of the set-up phase, income of EUR 0.1 billion from the construction contract was recognized as of March 31, 2016. Since the start of the operation phase on April 1, 2016, the separate fees for operation and maintenance services have been recognized as revenue in the respective periods in accordance with the provisions of IAS 18. Net revenue of EUR 75 million was recorded in the reporting year. Of the total revenue in the amount of EUR 0.3 billion recognized by Satellic NV in the previous year, EUR 68 million was posted after the start of the operation phase.