8. Investments in associates

Investments in associates as at 31 December 2014 and 2013 were as follows:

Associate Main activity Voting share capital, % 2014 Carrying amount 2013 Carrying amount
LLC T2 RTK Holding Communication services 45 72,848   -
OJSC Tsifrovoe televidenie TV services 25.33 1,319   -
OJSC KGTS Communication services 37.29 342 383
CJSC Samara Telecom Communication services 27.78 158 163
OJSC WestBalt Telecom Communication services 38 140 131
CJSC IKC Express Communication services 37.9 80 83
OJSC Vostoktelecom Communication services 25 88 81
Other Various - 73 77
Total investments in associates 75,048918

In December 2014 the Group transferred shares of its subsidiaries NKS Media LLC, NMA CJSC, ArtMediaMarkt OJSC and 250 cash payment for the 25.33% share in OJSC Tsifrovoe televidenie. Fair value of the Group share in OJSC Tsifrovoe televidenie was 1,319 after the completion of transaction.

In 2014 the Group received dividends from its investments in equity accounted investees in the amount of 11 (2013: 8).

All associated companies are incorporated in Russia.

There are no contingent liabilities relating to the Group's interest in the associates.

Summarized financial information as at 31 December 2014 and 2013 and for the years then ended of the associates is presented below:

Aggregate amounts 2014 2013
Assets 226,096 3,143
Liabilities 126,935 407
Revenue 73,388 1,968
Net income (669) 195

Summarized financial information for substantial associates as at 31 December 2014 and 2013 and for the years then ended is presented below:

Associate Year Non-current assets Current assets Non-current liabilities Current liabilities Revenue Net income/(loss)
OJSC KGTS 2014 842 206 43 88 751 97
2013 966 158 11 86 742104
CJSC Samara Telecom 2014 278 362 23 51 165 12
2013 310 396 21 100 20115
OJSC WestBalt Telecom 2014 125 280 - 38 142 8
2013 128 253 - 36 150(1)
CJSC IKC Express 2014 12 217 - 18 55 (4)
2013 13 213 - 8 726
OJSC Vostoktelecom 2014 285 124 5 55 502 30
2013 102 287 5 59 59531
T2 RTK Holding LLC 2014 197 834 20 269 69 141 53 578 71 529 (848)
2013 - - - - --
OJSC Tsifrovoe 2014 1,931 1,090 10 1,723 - -
televidenie 2013 - - - - - -

Reconciliation of the summarised financial information presented to the carrying amount of the interest in associates:

Summarised financial information OJSC Tsifrovoe televidenie OJSC KGTS CJSC Samara Telecom OJSC WestBalt Telecom CJSC IKC Express OJSC Vostoktelecom
Net assets at December 31, 2014 1,287 917 567 366 211 349
Interest in associates, % 25.33 37.29 27.78 38 37.9 25
Goodwill 993 - - - - -
Carrying value at December 31, 2014 1,319 342 158 139 80 87

Investment in T2 RTK Holding LLC

  2014
At 1 January -
Acquisition 73,339
Share of profit (491)
At 31 December 72,848

Investment in T2 RTK Holding LLC was recognised as a result of the deal with the mobile operator Tele 2 Russia (refer to Note 1). There is no quoted market price available for its shares.

The carrying value of the investment at the acquisition date was determined with reference to the value of the assets transferred to T2 RTK Holding LLC based on the valuation report of an independent appraiser. The determination of the fair value was based on the following assumptions:

  • discount rates are estimated in nominal terms on pre tax basis. Nominal rates for discounting vary from 11.7% to 13.2%;
  • EBITDA margin is based on historical actual results and varies from 26% to 27%;
  • projected annual growth of revenue is at average 11.6%, projected annual growth of customer base is at average 8.7%;
  • terminal growth rate was 2.5%.

As at 31 December 2014 the Group conducted impairment testing of this investment in associate. Key assumptions used by management in impairment testing are as follows:

  • discount rates are estimated in nominal terms on pre tax basis. Nominal rate for discounting was 17.87%;
  • EBITDA margin varies from 22% to 45%;
  • projected annual growth of revenue is at average 16%, projected annual growth of customer base is at average 14%;
  • cash flow projections cover the period of twelve years, cash flows beyond twelve-year period are extrapolated using growth rate of 3%.

On the basis of the impairment testing the recoverable amount exceeded the carrying value of the investment in associate.

The group has no commitments relating to its associate. There are no contingent liabilities relating to the Group’s interest in the associate.

Summarised financial information for T2 RTK Holding LLC

Set out below are the summarised financial information for T2 RTK Holding LLC which is accounted for using the equity method.

Summarised statement of financial position
31 December 2014
Current  
Cash and cash equivalents 3,637
Other current assets (excluding cash) 16,631
Total current assets 20,268
Financial liabilities (excluding trade payables) 17,416
Other current liabilities (including trade payables) 36,162
Total current liabilities 53,578
Non-current  
Assets 197,834
Financial liabilities 55,192
Other liabilities 13,949
Total non-current liabilities 69,141
Net assets 95,383
Summarised statement of profit or loss and other comprehensive income  
  01 April - 31 December 2014
Revenue 71,529
Depreciation and amortisation (13,046)
Interest income 188
Interest expense (5,612)
Profit or loss from continuing operations (278)
Income tax expense (570)
Post-tax profit from continuing operations (848)
Total comprehensive income (848)
Reconciliation of summarised financial information to the carrying value of the investment  
Summarised financial information  
Opening net assets 1 April 2014 96,231
Profit/(loss) for the period (848)
Closing net assets 95,383
Interest 45% 42,923
Goodwill 29,925
Carrying value 72,848

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